Month: October 2021

Over the last two years, holidaymakers have faced disruptions when heading abroad, or even when planning a staycation in some cases. Now, with travel restrictions gradually lifting, you may be looking forward to planning your next trip.

One of the 2022 travel trends is sustainability. With a few small changes to your holiday plans, you could reduce your negative impact on the environment and support communities. When discussing sustainable travel, the focus is often on carbon emissions. While important, there are other things you can do to minimise harmful impacts, while maximising the benefits tourism can bring.

As you book your next trip, here are 10 things you could do to make it more sustainable.

1. Give cruising a miss

Choosing a cruise for your holiday can mean you get to see several different places on your trip and enjoy all the amenities offered onboard. But in terms of sustainability, cruising can be harmful to both the environment and communities.

Cruise ships are typically all-inclusive, which can be attractive if you want a stress-free holiday. However, it also means you’re less likely to spend your money at local attractions, shops, cafes, and more, so the positive impact of tourism is reduced. On top of this, cruise ships generate and dump huge amounts of waste, which can destroy valuable marine ecosystems, and, in many cases, your carbon footprint will be higher than a land-based trip.

2. Offset your carbon footprint

Ideally, sustainable travel would mean cutting out carbon-intensive transport, like flying. For most people, that would mean they couldn’t enjoy the holiday they want, and carbon offsetting presents an alternative.

Carbon offsetting means you take steps to reduce emissions to compensate for emissions you’ve used somewhere else. For example, you may invest in projects like protecting rainforests or installing a wind farm, after you’ve flown on holiday. If you’re interested in carbon offsetting, be sure to do your research and choose a reputable provider.

3. Use public transport to get around

When you’re on holiday, rather than hiring a car, opting for public transport where possible can cut your environmental impact. It’s a chance to see more of the destination you’re visiting and get to know what life is like for the locals too.

4. Support local businesses

How much of what you spend on holiday benefits the community you’re visiting? Choosing to eat at a local café and purchase souvenirs from a family-run shop means your money is far more likely to stay in, and benefit, the local area rather than increasing the profits of large corporations.

5. Choose excursions run by local guides

Much like the above, choosing excursions and trips hosted by locals means you can actively support the local economy and community. You could also get a lot more out of the experience by being able to listen to a local perspective.

6. Cut down your use of single-use plastic

Plastic is having a devastating impact on environments around the world. You may have made changes at home to cut down your use of plastic and, with a bit of planning, you can do the same when you’re on holiday. Packing a refillable water bottle and backpack is simple, and over the holiday could mean you use far fewer disposable bottles and plastic bags.

7. Visit protected areas and environmental projects

A holiday abroad is a great opportunity to see different natural environments to those we find in the UK. Paying to visit protected sites and other sustainable projects can help ensure they’re funded so future generations can enjoy these areas too.

8. Choose sustainable accommodation

As sustainability becomes more popular, holidaymakers have more choice than ever when choosing sustainable accommodation. From an eco-lodge to a hotel that’s leading the way to reduce water use, where you decide to stay can have an impact. Alternatively, choosing accommodation that is locally run or prioritises local suppliers and producers can support communities.

9. Book one, longer trip a year

As travel has become more affordable, it’s become common to take several trips throughout the year and even visit destinations for just a weekend. Slowing down and spending longer in one destination can help reduce your environmental impact. It’s also a chance to really explore and discover hidden gems rather than just ticking off a handful of tourist sights.

10. Embrace the culture

Spending some time learning about the place you’re visiting can help you have a much richer experience when you’re there. Whether you learn some key phrases in the local language or read about the history of the place, embracing the culture can help you identify where small changes can improve the sustainability of your holiday.

From the State Pension triple lock to the cost of living, Covid-19 is affecting economic figures. As the economy reopens, you may have noticed the price of things has risen. From your grocery shopping to days out, inflation means the cost of living is rising and could reach 4% this year.

A small amount of inflation is often seen as a good thing. Prices gradually rising can encourage demand, but higher levels of inflation can suggest demand is outstripping supply and that the economy is running into difficulties.

The Bank of England carefully monitors inflation and can take steps to keep it in check. It has a target of 2% inflation each year, but the inflation rate for 2021 could be double this.

The pandemic impacts the cost of living

According to the central bank’s latest Monetary Policy Report, inflation is expected to temporarily reach 4% in the near term. It notes that this rise largely reflects the impact of the pandemic as the economy recovers, which has led to higher energy and goods prices. However, the report adds inflation is projected to return close to the 2% target in the medium term.

The rate of inflation can seem small, even when it’s double the target. Yet, this can add up to more than you think and affect your short- and long-term finances. It means you could see your day-to-day expenses creep up in line with rising prices.

It works in reverse too and you can see the impact when looking at how the value of money has changed. Let’s say you had £1,000 in 2000. According to the Bank of England, in 2020 you’d need £1,721.35 to achieve the same spending power due to the impact of inflation.

So, inflation means your outgoings are rising, while some of your assets and income are gradually becoming less valuable. If you don’t consider inflation when financial planning, you could end up with an unexpected shortfall.

Retirement is a good example of this. If you set out the level of income you need at the start of retirement and expect to draw the same income for the rest of your life, you’re likely to find it’s not enough to maintain your lifestyle in your later years. You need to consider how the rising cost of living will affect the income you need.

Could rising inflation lead to interest rates rising?

Interest rates have been at record lows for 12 years. The Bank of England first slashed interest rates during the 2008 financial crisis, and has kept them low to support the economy ever since.

While no announcement has been made, the Bank’s latest report does hint that it would be willing to raise interest rates to reduce inflation if necessary. For some, it would be a welcome move, but it could cost others money.

For savers, rising interest rates could help their money keep pace with inflation. Current interest rates mean it’s likely that money held in a savings account has fallen in value in real terms over the last decade. An increase in rates could provide an opportunity for savings to grow in real terms.

For borrowers, it would mean outgoings rise further. The interest you pay on a mortgage, credit card, or loan, for example, will also rise if you’re on a variable rate.

Whether an interest rate rise is good for you will depend on if you’re a saver or borrower.

How can your savings beat inflation?

While rising interest rates could help savers maintain their spending power, it’s unlikely large rises will happen any time soon. It’s far more likely that the Bank of England will make gradual increases to the interest rate, and it could take years for it to be on par with the rate of inflation.

If you want to maintain or grow your spending power, your money will need to work harder. There are several ways of doing this, and, in some cases, investing your money can provide a solution.

Investing does come with risks, and values can rise as well as fall. However, historically, investment values have risen, despite short-term volatility, and it can be a way to increase the value of your money in real terms if returns outstrip the pace of inflation.

When investing, it’s important you set out what your goals are and consider your risk profile. You may be tempted to invest money held in your savings account, but if it’s part of your emergency fund, it should be readily accessible and investing likely isn’t the right option for you.

Whether you’re a professional or a retiree, inflation has an impact on your finances. If you’d like to discuss what you can do to manage the impact of inflation, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

When you consider your financial plan, who do you involve? Often, it’s done independently or with a partner, but there could be advantages to making your wider family part of the process. If it’s not something you’re already doing, here are five reasons to involve children, grandchildren, and others in your plans.

1. It could encourage younger generations to consider their own financial plan

First, it could be beneficial to them. Being involved in your financial plan can mean they start thinking about their own long-term financial security.

While still working, it’s common not to think about retirement, even though the decisions professionals make, even early in their careers, can have an impact on the retirement they enjoy. Seeing the decisions you need to make about retirement and how to create an income could make them more engaged with the process and set them on the path to greater financial freedom. It could also mean they consider things they may have overlooked before, such as the need for financial protection, or when to choose investments over savings.

2. It can help you understand how to help your family reach their goals

You may know what your loved ones are hoping to achieve, but do you know the details? After talking through their goals, you may want to lend a financial helping hand and that could change your own financial plan.

According to an FTAdviser report, just 13% of parents over the age of 60 plan to pass on wealth to their children during their lifetime. However, in some cases, a gift now can have a far greater impact on their life than an inheritance will have.

Helping children and grandchildren to buy a home is a common example. With many of the younger generation struggling to save a deposit, a financial gift now could provide more security in the short and long term. If you knew this was a goal of your child, would you reduce their inheritance to provide a gift? By talking through their plans, you have an opportunity to understand how your wealth can have the greatest impact.

3. Discussing inheritances can lead to better financial decisions

The FTAdviser report found 72% of parents plan to pass on wealth to their children after their death. However, two-thirds said they rarely or never discuss inheritance with their children.

Talking about inheritance can be difficult and can bring up many emotions. Yet, it can help your loved ones plan their own futures more effectively. If they believe they’ll receive a greater inheritance than they actually will, they could be more reckless than they otherwise would be. Honest conversations about investment could also provide them with clarity and confidence about their future.

With more time to think about how they’d use an inheritance, your loved ones could make better financial decisions when they receive it.

4. It can improve your later-life plans and provide confidence in them

Later-life planning is an important part of creating a long-term financial plan. Yet, 4 in 10 parents have not discussed their later-life plans with their children. Again, it can be difficult to think about how your lifestyle and needs will change in your later years, but it is important.

It can provide both you and your children with greater confidence and ensure your wishes are carried out. The FTAdviser report highlights that a third of adults aged 30–59 with at least one surviving parent are worried about the prospect of managing the finances of their parents if they can no longer do it themselves. By involving them in the financial planning process sooner, they will be in a better position to make decisions on your behalf should they need to.

5. It can help you create an effective estate plan

Almost 80% of families do not have any estate planning strategy in place. Of those that do, less than half of parents said their children knew exactly what the plan was. An effective estate plan can help you ensure that loved ones benefit from your wealth when you pass away.

It may include discussing Inheritance Tax or how to make provisions for grandchildren who are too young to manage an inheritance themselves. Involving family in this process can help you understand concerns they may have and create a solution that suits your wishes.

If you’d like to involve your family in your financial plan, we can help. Whether you want to be open about the inheritance they can expect to receive in the future or get a better understanding of how you can financially support their goals, please get in touch.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning.

How often do you discuss your finances? In the UK, talking about money and our long-term financial plans are often still seen as a taboo subject. Breaking down this barrier could help you and those who are important to you make better money decisions.

Talk Money Week will take place between 8–12 November and aims to encourage people to talk more about finances. From discussing pensions in the workplace to saving goals with family, having an open conversation about money can be a positive thing. Despite this, Talk Money Week research found that 9 in 10 adults, the equivalent of 47 million people, don’t find it easy to talk about money, or don’t discuss it at all.

Talking about money can be difficult, but according to research, people who talk about money:

• Make better and less risky financial decisions
• Have stronger personal relationships
• Help their children form good lifetime money habits
• Feel less stressed or anxious and more in control.

It’s a step that can help improve your financial wellbeing and long-term resilience. It doesn’t just help you, either – it can support the financial security of the people around you too.

If money isn’t something you talk often about, it can be difficult to start conversations and get into the habit. Here are three reasons to start doing it now.

1. Take control of your finances and goals

Money-related stress is common. Research from CIPHR found that 79% of people feel stressed at least once a month, and money was the top cause of this. Some 39% of people said money was the thing they worried most about.

Talking about your concerns can help your worries seem more manageable. When you’re stressed, it can be difficult to make decisions and understand what your options are. Talking about it can help you create solutions and take control of your finances.

You shouldn’t just speak about concerns, either; talking about what money will allow you to do can help motivate you and keep you on track. For instance, talking about a savings account that will help you book a dream trip, or how increasing your pension contributions will mean you can retire early, are just as important as sharing the things you worry about.

2. Make better financial decisions

Financial decisions can seem complex and, at times, it can be difficult to understand what your options are. In other cases, you may take certain steps simply because that’s what you’ve done in the past, even if it’s not right for you now.

Perhaps you save into a savings account with your current account provider because that’s what you’ve always done. But a conversation with a colleague could highlight that there’s an alternative account that’s offering a higher interest rate to help your money go further. Or a conversation may mean you start to consider investing some of your savings rather than holding cash.

Talking about money can help you look at your finances from a different perspective and mean you make better decisions.

3. Pass on your financial knowledge

Over the years, you’ll have picked up your own body of financial knowledge. By making it part of everyday conversation, you can help people around you make better financial decisions too. Perhaps you could highlight why paying into a pension early makes sense to younger generations, or have some tips for starting an investment portfolio.

It can also help you foster a relationship where loved ones feel comfortable coming to you to ask for advice or share their concerns. It can mean they’re less likely to bury their head in the sand if they’re struggling or to miss opportunities.

Having open conversations about money and how it can help you achieve goals can help loved ones make better decisions.

When should you talk to a financial planner?

Talking to loved ones about your finances can be beneficial. However, there are times when working with a financial planner can help you get the most out of your assets. A professional can help you understand the complexities of things like tax allowances, as well as how the decisions you make now will affect your goals.

By working with a financial planner, you know you can have confidence in your plan. It can be useful at any point in your life, including milestones like retiring, and is a step that can ensure you remain on the right track long term. If you’d like to arrange a meeting, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

You may have thought about who you’d like to benefit from your assets when you pass away and written a will to ensure your wishes are carried out. However, you may have overlooked what you’d like to happen to your pension.

As you’ll be paying into your pension over your working life, it may be one of the largest assets you own. Yet, it’s easy to forget about it when planning what you’d like to happen to your estate, especially if you’re not drawing an income from it yet. If you have a defined contribution (DC) pension, it’s essential you complete an expression of wishes to ensure your loved ones benefit from your savings.

What’s your pension worth?

According to the Telegraph, after a lifetime of saving, the average UK pension pot stands at £61,897. That’s a significant sum that could have a positive impact if left to loved ones. Depending on your circumstances, your pension value could be much higher than this figure, particularly when you consider investment returns.

It can be difficult to understand how your pension will change over time. During your working life, you are likely to still be making contributions, as well as benefiting from tax relief and employer contributions. As most pensions are invested, investment performance will also mean the value of your pension will rise and fall.

Once you retire, you may begin withdrawing an income from your pension, and it may still be invested. As a result, valuing your pension can be challenging. But looking at how much it’s worth now and how it could change in the future demonstrates why making your pension part of your estate plan is important.

The introduction of auto-enrolment, which means the majority of workers are automatically enrolled into a pension, means more workers than ever will need to consider how they’d like to pass on their pension.

Completing your expression of wishes

While your pension may be an important part of your wealth, it’s not covered by your will. This is why you need to complete an expression of wishes.

An expression of wishes is simply a statement that tells your pension provider who you’d like to receive your pension savings if you die before accessing the money. It’s something that can be difficult to think about, but it can help you make provisions for those who are most important to you if something did happen.

Without an expression of wishes, the pension trustees will make a decision, but it can make the decision harder, and it may not align with your choice. It’s important to note that pension trustees may take other factors into account when deciding who receives your pension. This may include whether you have any dependents, but the trustees must do their best to accommodate your wishes.

If you haven’t completed an expression of wishes, it’s simple to do. If you have an online account for your pension provider, you can usually complete a form within minutes. If you don’t use an online account, you can get in touch with your provider to send you the relevant paperwork.

You will need to complete an expression of wishes for each pension you hold. This could be the same person, or someone different. You can name more than one beneficiary for each pension, allowing you to split the sum between your children, for example.

If you’ve changed jobs frequently, you may have several pensions. It’s important you keep track of each and complete an expression of wishes. In some cases, it may make sense to consolidate your pensions to make them easier to manage. If you’d like to discuss this, please get in touch.

How leaving your pension to a loved one could reduce an Inheritance Tax bill

If your estate could be liable for Inheritance Tax (IHT), leaving your pension to loved ones can make sense.

The amount of tax paid on an inherited pension depends on the age you pass away and how the beneficiary accesses it. However, it’s usually a lower rate than IHT.

For the 2021/22 tax year, the nil-rate band is £325,000. If the value of your estate is below this amount, your estate will not be liable for IHT.

Many people can also take advantage of the residence nil-rate band, which increases the threshold if you’re leaving your main home to children or grandchildren. For the 2021/22 tax year, the residence nil-rate band is £175,000. In effect, this means most people can leave up to £500,000 before their estate is liable for IHT.

However, the standard IHT rate is 40%. So, if you do exceed these thresholds the tax can significantly reduce what your loved ones receive.

In contrast, a beneficiary is likely to face a much lower rate if they inherit your pension. For example, if you passed away before you turned 75 and the beneficiary took your pension as a lump sum, no tax is usually due. If you passed away after the age of 75, the beneficiary is likely to pay Income Tax at their nominal rate, which may be lower than the IHT rate.

The tax due on inherited pensions can seem complex and will depend on personal circumstances. If you’d like to discuss what it could mean for you or your beneficiaries, we’re here to help. However, if your estate could be liable for IHT and you have other assets to create an income in retirement, it can make sense to leave your pension so that it can be passed on.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate or tax planning.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

Your pension might not be something you think about often. Unlike your current account or even ISA, it could be decades before you’ll be able to access it. So, it’s not surprising that keeping track of pensions isn’t a priority for many people. However, it’s important for effective retirement planning and ensuring you’re on track. For some, pension consolidation makes the task easier.

For many workers, pensions are becoming more difficult to keep track of for two reasons:

1. Under auto-enrolment, most employees will now benefit from a workplace pension. While this means more people are saving for their retirement, it also means more workers now need to keep track of their pension savings.
2. Alongside auto-enrolment, it’s become more common to switch jobs. According to Scottish Widows, the average employee will change jobs 11 times in their working life. That means the average person needs to keep track of multiple pensions.

As it’s not something you’re likely to think about every day, losing touch with a pension can be easier than you think. Not updating your address when you move can mean it’s easy for small pension pots to slip your mind.

In 2020, the Association of British Insurers (ABI), found just 1 in 25 people consider telling their pension provider when they move home. As a result, ABI estimated that there are around 1.6 million “lost” pensions, worth £19.4 billion in total. While small pensions may seem like they’ll have little impact on your retirement, they can help you reach goals, especially when you have several.

If you’re reviewing your pensions, the first thing to do is make sure you have the details for them all. If you’ve “lost” a pension, the government’s tracing service can help you track it down.

Why pension consolidation is worth thinking about

Pension consolidation means combining pensions into one pot. It can make it far easier to keep track of your retirement savings.

Having all your pension savings in one place means it’s easier to manage and see if you’re on track to reach retirement goals. It can also help you understand how to access your pension at retirement and create an income that suits you.

For some people, consolidating pensions could also reduce the total fees paid. It could mean more of your money is invested to deliver a larger sum when retiring.

In most cases, consolidating your pensions is relatively straightforward. However, the Scottish Widows research found that 1 in 10 savers had no idea it was an option, and 12% said it was too much hassle.

So, it’s not surprising that almost three-quarters of Brits (72%) would like to see a new system that automatically consolidates their small pension pots as they move jobs.

While this could make managing pensions simpler for workers, it’s not something that will be introduced any time soon. As a pension saver, you’ll need to take control and consolidate your pensions yourself. To do this you’ll need to contact the pension provider you want to transfer to and check they will accept the transfer and then complete a form.

Before you consolidate your pensions, there are two things you need to think carefully about: which pension provider to move your savings to, and whether it’s the right option for all your pensions.

1. Choose a pension provider to transfer to

If you want to consolidate your pension, you’ll need to choose a pension provider to move your savings to. This could be a provider that already holds some of your savings or a new one.

At first glance, pension providers can seem similar. However, things like fees, fund options, and investment performance, can all have an impact on your savings and, in the long term, your retirement. It’s important to choose a provider that makes sense for you. Remember: your pension is a long-term investment, so you should consider the impact over the time frame you’ll be saving into a pension.

We can help you compare pension providers and answer any questions you may have when deciding where to place your retirement savings.

2. Check if transferring out of a pension is right for you

Pension consolidation can make it easier to manage pensions, but you should review your existing pensions first. In some cases, transferring out of a pension could mean you lose valuable benefits.

Some pensions, for example, will allow you to take a lump sum or income earlier than normal, or provide a pension for your spouse. If you transfer out, you’d lose these benefits, and another provider may not offer them. Assessing your existing pensions to understand what they offer and how the benefits could fit into your retirement plan is a crucial step to take to ensure you make the right decision for you.

If you need help managing your pensions and understanding what they mean for your retirement, please contact us. We can help you understand if consolidating pensions makes sense for you and how to proceed if it does.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.