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Month: November 2021

Peace Of Mind That You’re On The Right Track

How To Plan For A Confident Retirement To Live The Lifestyle You Want

Retirement might seem a long way off but the later you leave planning for it, the less chance you have of achieving the retirement you want. We all dream of how we’ll spend our retirement but that dream looks different for everyone.

Some people want to spend more time with their family, while others want to enjoy long holidays and see the world, or simply wish to be financially independent. No matter what your dreams are, they rely on having sufficient pension savings to achieve them and live comfortably.

Specific Retirement Goals

People who associate confidence with retirement are most likely to have specific retirement goals and know what steps they need to take to reach them. But sadly, some people don’t feel confident that they will have enough savings to live comfortably after they retire.

Many people have a fear of outliving their money, but most don’t have a clear idea of how much money they need during retirement. It’s important to remember that retirement doesn’t happen at a certain age, it happens when you have enough money to live on. And having this clear direction and understanding will give you peace of mind that you’re on the right track.

Do You Feel Confident About Your Retirement?

Pensions can seem complex and overwhelming, and there are many reasons you might lack confidence in your retirement plans.

  • You might be worried that you’re not saving enough, but don’t feel you can afford to save more
  • You might feel ready to retire now, but you’re not sure if you can rely on your current pension savings to provide enough money for the rest of your life
  • You might have experienced a change to your financial situation, including life events such as divorce, and have new concerns about whether you can save enough
  • You might have previously felt confident about your retirement plan, but the COVID-19 pandemic has derailed your savings

Don’t Suffer A ‘Horrible Shock’

Research shows that there is a significant difference in how confident people feel about retirement based on whether or not they have spoken to a financial adviser. 65% of UK adults who have obtained financial advice say they do feel confident that they will have saved enough for retirement, compared to only 41% of those who have not.

A positive retirement experience begins with a plan designed to help you live life on your terms. Your adviser will ask questions about your finances, personal circumstances and retirement goals, and create a plan that’s unique to you and will help you
reach the retirement you’re aiming for.

Providing Answers To Your Planning Questions

People who know where they’re going and how to get there feel more confident in their retirement plan. Your adviser will be able to answer these key points.

What Do I Need To Know?

  • How much you need to save for retirement
  • How to save tax-efficiently for retirement
  • How pensions work
  • The type of pension you should choose
  • The right amount to contribute to your pension
  • How to boost your pension pot
  • How your pension should be invested
  • How to withdraw money from your pension

Need To Know All Your Pension Options?

When it comes to financial planning, we listen so that we can fully understand your unique needs. If you don’t feel confident about how your retirement looks, don’t delay. Speak to us to review your options.

Market Update November Monday 29th 2021

Inflation concerns give way to a new Covid variant B.1.1.529

All thoughts of recovery, inflation and monetary policy tightening were put to one side this week, as investors were rudely reminded that we remain in a global pandemic. The emergence of the Covid mutation B.1.1.529, first identified in Botswana, had governments racing to introduce travel restrictions, with Israel and the UK amongst the first to stop incoming flights from a number of southern African countries.

The concern is that this new variant, in the space of less than two weeks, now dominates all new infections in South Africa, with the effectiveness of vaccines presently unknown. The R value, or the effective transmission rate, is currently at 2 where it was first identified in South Africa, with anything above 1 indicating exponential growth.

Equities markets fall heavily on Friday

As of 12pm on Friday, London time, European equities were down 3.5% over the week, having already fallen prior to Friday due to several European countries reintroducing restrictions to combat rising Covid cases. UK equities lost 1.9% over the week, having suffered a fall of 2.7% on Friday.

Japanese stocks fell 2.9% over the week, whilst the Australian market dropped 1.6%. Emerging markets fell 1.1%, however, many markets do not open until the afternoon London time. Amongst those whose time zone had opened in the morning, India was down 4.2%, whilst Hong Kong stocks fell 3.9%. Similarly, the US stock market has yet to open on Friday, having recorded returns of 0.1% for the week to Thursday’s close. Whilst US technology stocks were down 1.3%, but this reflects rising expectations of monetary policy tightening in the US, rather than concerns over the new Covid variant.

Covid trumps inflationary concerns for the moment

Prior to Friday, the latest data for the US Federal Reserve’s (Fed) preferred measure of inflation was released for the year to October, with the core PCE index (Personal Consumption Expenditure, excluding food and energy) coming in a 4.1%, higher than the previous month’s recording of 3.7%, and the highest level in three decades. However, the market flipped from concerns over inflation and tightening monetary policy, towards fears of further lockdowns by Friday.

Haven assets rally

Government bonds, which had been selling off earlier in the week, rallied. 10-year US Treasury yields, having touched a high of 1.68% intraweek, were back down at 1.52% on Friday. It was a similar story elsewhere. German bunds, having climbed to a yield of -0.21%, fell to -0.32% whilst UK Gilts, which had risen to 1.04% on Wednesday, were back down to 0.85% by Friday.

Gold rallied on Friday, after selling off earlier on in the week on the back of various Fed officials pointing towards a faster reduction in the bond-buying programme in the face of rising inflation. Having hit a low point of $1,780 intraweek, it is now trading at $1,814 an ounce, although this still represents a loss of just over 2% for the week.

Industrial commodities sell off

Crude oil also fell sharply, with Brent crude now trading at $77.5 a barrel, having almost touched $83 mid-week. Similarly, US WTI (West Texas Intermediate) is trading back down at $73.1, having peaked at slightly over $79 on Wednesday.

Issues under discussion

Covid mutations and vaccine efficacy

Since the pandemic began, Covid mutations have always been a key risk for the global economy. Those stocks most at risk from economic lockdowns are likely to take the most pain once again whilst vaccine efficacy against this new variant is established. Travel stocks, amongst many others, being the most obviously at risk. However, we must not lose sight of how effective the vaccination effort has been to date, both in terms of efficacy and speed of delivery.

Further to this, companies such as Astra Zeneca and Pfizer have repeatedly said that should a mutation arise that evades vaccines, it would not be that difficult or long-winded to reformulate vaccines against new variants. Therefore, although we can not rule out further lockdowns, we can be reasonably confident that the length of any future restrictions and the economic damage would be commensurably less than that experienced during 2020. Markets often overreact, both to the downside as well as the upside, and we will be mindful of opportunities that this period may produce.

Post-Work Income

How Much Annual Income Will You Receive From Your Pension And Savings?

Retirement will probably be one of the biggest events you ever go through in your life, so it’s not something you’ll leave to chance. But knowing how much you’ll need, and how to get there, isn’t always easy.

Just four in ten (43%) working 50-65-year olds who expect to retire know how much annual income they’ll receive from their pension and savings, according to new research. During times of economic uncertainty, the importance of seeking expert support about major financial decisions only increases.

Post-Work Income

The YouGov survey, which questioned 1,935 people aged between 50-65 who expect to retire, also found that women are less likely to know about their post-work income than men (39% vs 46%). The findings come despite the Financial Conduct Authority (FCA) introducing measures to help people make the most of their pension savings earlier this year. The move followed the regulator’s conclusion that those approaching retirement, acting without guidance or advice, were struggling to make informed decisions.

Geographic Disparity

Geographically, the results show significant disparity, with only a third of Londoners (34%) knowing how much they’ll receive post-retirement compared to more than half of those in the East of England (52%). Additionally, there is a notable drop in awareness amongst those who are divorced or separated (37%), or never married (34%), compared to those who are married or in a civil partnership (46%).

Knowledgeable’ About Retirement Options

Backing up the FCA’s estimate that 100,000 people enter drawdown every year without taking financial advice, the study also found that the majority (53%) consider themselves ‘knowledgeable’ about their retirement options.

More men consider themselves knowledgeable (57%) than women (48%). Across the UK, those in the East of England (60%) are the most confident in their knowledge of retirement options, those in Yorkshire and Humber the least (49%).

Financial Advice

These findings highlight that not enough people are taking professional financial advice in those crucial few years before retirement. The decisions made at retirement are big ones and have long-term consequences.

Many people spend years accumulating a large amount of money in pensions and other savings, but really don’t know what that might mean, how much income they can reasonably expect to receive and how best to take that income.

Giving You Peace Of Mind

Understanding the savings you have, and the options you have with those savings is key. Taking advice can help to give you peace of mind that the choices you make when accessing your savings are right for you. To find out more, please contact us.

Wealth Creation

Where can you turn if you want to invest tax-efficiently?

Tax-efficiency is a key consideration when investing because it can make such an enormous difference to your wealth and quality of life. If you have an income of over 50,000 it doesn’t just push you into a higher income tax bracket, it also means that you’ll pay higher tax on capital gains and dividend income from your investments. So, it’s important to choose a tax-efficient investment vehicle that is appropriate for your particular investments goals and tax position.

Individual Savings Accounts (Isas)

ISAs come in various forms, including the Stocks & Shares ISA, for tax-efficient investing. You can invest up to 20,000 a year (tax year 2020/21) in a Stocks & Shares ISA, and all capital gains, interest growth and dividend income from these investments are protected from tax. If you’ve used your ISA allowance, you may wish to consider paying into accounts for your partner (who also has a 20,000 annual ISA allowance in this tax year) and your children (who have a 9,000 annual ISA allowance in this tax year). Bear in mind that the money will be in their names and will legally be theirs.


Pensions are designed primarily for retirement saving and can usually be accessed from the age of 55. Not only do pensions offer protection from tax on capital gains, interest growth and dividend income (like ISAs), but you’ll also receive tax relief on your contributions. Higher rate taxpayers receive tax relief at 40%, while additional rate taxpayers receive 45%.

There is a limit on the pension contributions you can receive tax relief on, which in the current tax year is capped at 40,000 a year (or 100% of your salary if your salary is lower). But if you have contributed less than your limit in recent tax years, you may be able to pay in more this year.

If you have an annual income of over 200,000, you may have a lower limit on contributions and should obtain professional financial advice to assess your options. If you are approaching your Lifetime Allowance on pension savings, currently 1,073,100 (tax year 2020/21), another investment vehicle may be more tax-efficient.

Alternative Tax-Efficient Schemes

Options include:
• The Enterprise Investment Scheme (EIS), for investment in early-stage companies not listed on the stock exchange.
• The Seed Enterprise Investment Scheme (SEIS), for investment in start-ups raising their first  150,000.
• Venture Capital Trusts (VCTs), for investment in small, expanding companies. These are listed on the London Stock Exchange.

HM Revenue & Customs offers tax incentives through these schemes, including income tax relief, to encourage investment in small businesses. The incentives vary and are only suitable for sophisticated investors. You should always obtain professional financial advice.

Tax-efficient investment schemes are some of the most effective ways for investors to save their funds, or re-invest them to generate greater returns or diversify their investment portfolios.

Market Update November Monday 22nd 2021

US stocks continue to hit new highs, despite increasing expectations for a rate rise

The US stock market hit its 66th all-time high this year, setting the market up for its second-biggest number of annual records ever, only behind that of 1995, as large-cap technology companies continue to outperform with strong earnings and positive outlooks. This contrasts with the emerging markets which have been hit by a number of headwinds, including a policy-induced economic slowdown in China, rising inflation leading to a number of emerging market central banks tightening monetary policy, a slower Covid vaccine rollout and a strengthening US dollar.

As of 12 pm London time on Friday, US equities rose by 0.5% for the week, having risen by over 25% year to date. European equities were down 0.1%, whilst the UK stock market fell by 1.6%, as energy and financial stocks sold off. Japanese equities were up 0.2%, whilst Australian stocks dropped 0.6%. Emerging markets were down 0.9%, with Latin America falling particularly hard, losing 4.9% over the week. The US dollar strengthened by over 2% versus a basket of emerging market currencies, piling pressure on those countries dependent on overseas financing.

US and UK retail sales exceed expectations, despite rising prices

Despite US retail sales data for October coming in ahead of expectations, rising 1.7% over the month, and raising further questions as to how long the US Federal Reserve can hold out before raising rates, Treasury yields, which move inversely to price, fell.

It was a similar story for the UK, as inflation came in higher than forecast at 4.2% and retail sales climbed by 1.6% in October (excluding auto fuel), also ahead of expectations, yet gilt yields also fell. 10-year US Treasury yields are currently trading at 1.53%, with German bunds and UK gilts trading at -0.34% and 0.86% respectively. However, both the US dollar and the British pound strengthened versus the Euro, with the European Central Bank not expected to raise rates anytime soon.

Crude oil eases as China and the US consider releasing reserves

Within industrial commodities copper fell just over 2%, now priced at $9,508 a tonne, and iron ore rose just over 3%, but still having given up close to 60% versus its year to date high reached in May. Brent crude fell 4.3%, now trading at $78.7 a barrel, as both China and the US said they were considering releasing reserves to ease price pressures. Gold is trading at $1,866 an ounce, broadly flat for the week, but having rallied over 8% since the end of September, benefitting from rising inflation whilst central banks continue to sit on their hands.

Investors underwhelmed by Japan’s fiscal stimulus plan

The new Japanese Prime Minister, Fumio Kishida, has begun to prepare a new fiscal stimulus plan equivalent to $350 billion, however, so far investors appear somewhat underwhelmed. The proposal involves distributing ¥100,000 (equivalent to $873) to households with children younger than 18 years old. However, last time this was done, it is estimated that recipients of the cash hoarded 70% of the money in bank savings rather than spending it. Few see any reason why it would be different this time around. At the same time, public debt to GDP stands at a massive 266% in Japan, something that will likely only deteriorate even further with such a proposal.

Turkey cuts interest rates in the face of rising inflation

The central bank of Turkey, under pressure from President Erdogan, cut interest rates for a third time since September, down to 15%. This is despite inflation spiralling out of control, having hit 20% in October. President Erdogan considers high-interest rates as part of the inflation problem. However, the Turkish lira has fallen by over 20% versus the US dollar since the rate-cutting cycle began, with the currency having weakened by close to 40% since its February peak this year.

Responsible Investing

Invest Today. Change Tomorrow

Responsible, sustainable and environmentally friendly investing is here to stay. But, while demand is growing among all age groups, genders and income bands, some savers and investors are missing their biggest opportunity for responsible investing, which is through their pension.

We all want to make responsible choices as more of us are becoming aware of global challenges, such as environmental issues, human rights and climate change. We’re also starting to care more about how our behaviours affect the planet and society.

Future Success

Taking ESG (Environmental, Social and Governance) factors into consideration when investing is becoming more mainstream. It is acknowledged that companies that act responsibly to their employees, the environment and the public have a better chance of future success than those that don’t. Investing in these companies is a logical approach financially as well as ethically.

Many pension holders understand this approach and see the value of it. In a recent survey, more than one-third of respondents said that the option to invest their pension only in sustainable companies is important to them. Nearly two-thirds said having clearly branded funds for investing in environmentally and socially responsible companies is important.

Pension Investments

The same survey suggests that pension holders feel that sustainable investing isn’t just important, but interesting. More than half of respondents said that a fund focused on clean energy and lowering carbon would make them more interested in their pension. A similar number felt that way about a zero-plastic fund.

But while pension holders feel these issues are important and interesting, that isn’t yet affecting the way they invest. Most people don’t manage their pension investments themselves, instead leaving their pension invested in the default options set by a provider chosen by their workplace. So, more than two-thirds of pension holders do not know how sustainable their pension is.

Environmentally Friendly

Many pension holders don’t know that they can choose their own funds, and therefore that they can choose sustainable or responsible funds. Around half are unaware of ways to ensure their pension is environmentally friendly.

Clearly, there is a large audience of individuals who would like to invest their pension more sustainably and responsibly but don’t know where to start. There are plenty of options, but without specialist experience, it can be difficult to select those that are truly responsible and environmentally friendly and will also deliver the financial return you’re seeking.

Investing With Purpose

Responsible investors essentially take responsibility for the impact that the companies they invest in have on the world. Speak to us about what responsible investing options are available in your pension scheme and for advice on how to help your money have the greatest impact. We look forward to hearing from you.

Market Update November Monday 15th 2021

US inflation exceeds expectations once again

It has been a mixed week for markets as US inflation data has once again exceeded expectations, coming in at 6.2% for the year ending in October, higher than forecasts of 5.9%. Whilst on the positive side, company earnings results have continued to exceed expectations, with the majority of companies having been able to pass on rising costs to customers.

Congress also passed an additional $500bn of spending on US infrastructure last Friday, with the ‘Build back better’ plan covering education, social and environmental issues still to come. And if that was not enough positive news, Pfizer’s late-stage trials for its antiviral Covid 19 pill produced positive results as to its effectiveness.

Cheaper equity markets take the lead

Short-dated US Treasuries sold off on expectations of nearing US interest rate rises, despite the US Federal Reserve (Fed) re-confirming that it expected inflation to be transitory and so would remain patient. More expensive growth stocks sold off versus more economically sensitive companies trading on cheaper valuations. Against this backdrop, as of 12 pm on Friday, London time, US equities were down 1.0%, having completed their longest all time streak of closing highs since 1997 on Monday. The US technology sector fell 1.7%.

European and UK stocks, which have greater cyclical exposure, both rose 0.5%. Japanese stocks were flat, whilst the Australian market fell 0.2%. Emerging markets rose 1.4% with positive returns being experienced across broad swathes of the index.

Government bond yields rise

The 10-year US Treasury yield, which moves inversely to price, rose to 1.56% following the release of the latest US inflation data. UK gilts and German bunds rose in concert, now trading at 0.91% and -0.24% respectively.

Gold rises whilst the Fed remains patient

Gold rose by over 2%, benefitting from higher inflation and now trading at $1,855 an ounce, whilst there is no immediate prospect of rates rising until the Fed drops its line of remaining patient in the face of what it sees as transitory inflation.

UK’s GDP growth rate disappoints for the 3rd quarter, but picks up in September

The UK economy’s growth in the third quarter came in beneath expectations, with GDP growing by 1.3%, lower than forecast by the Bank of England and sharply down from the proceeding quarter when GDP grew by 5.5%, benefitting from the end of lockdown. Output in the third quarter was negatively impacted by rising cases of Covid 19 and a shortage of goods and workers hitting growth. However, September’s output was encouraging, coming in higher than expected as the economy expanded by 0.6%, a significant uplift from 0.2% in August. The UK economy remains around 2.1% below its pre-pandemic size, a much larger gap than any other country in the G7, whilst the US and China have both exceeded the size of their pre-pandemic economies.

Issues under discussion

Inflation, inflation, inflation

The start of this year, value (more economically sensitive) stocks outperformed the market materially as growth and inflation expectations rose, whilst growth stocks (companies less affected by the economic cycle) have outperformed from the summer onwards as the emergence of the Delta variant of Covid and supply chain bottlenecks have impacted the growth rate from reopening.

The US Federal Reserve continues to tell investors that it expects inflation to be transitory, despite it having exceeded its 2% target every month since April. What is interesting is what the bond market is telling us. Short-dated treasuries are selling off, which suggests investors are increasingly expecting interest rates to rise sooner rather than later, with futures markets pricing in a 75% chance of two 0.25% rate rises in the second half of next year. Whilst longer dated Treasuries have rallied. This tells us that the bond market accepts that inflation is here today, but once interest rates start to go up, growth is likely to come down relatively quickly and inflation with it.

Since the financial crisis of 2008, the US’s public debt to GDP ratio has risen from 68% to 128% today. A very similar picture can be seen in many other countries across the globe, including China where it has risen from 27.2% to 67%. Indebted countries are much more sensitive to rate increases with, as an example, a 1% increase in rates for the UK adding about £18 billion to the UK Treasury’s financing bill, which ultimately has to be paid for by taxpayers. Therefore, although rates are more than likely to increase in the short term, the level that they peak at may be much lower than historically we would associate with current rates of inflation.

Reduce your Inheritance Tax Bill

Reduce your Inheritance Tax Bill

Even those who believe they have moderate wealth levels may still need to take action to minimise Inheritance Tax, particularly if they own property and have savings and investments.

Inheritance Tax is payable in the UK on death, and sometimes when you give away certain assets during your lifetime. It can be a great concern for individuals with wealth exceeding the current £325,000 nil-rate band (2020/21 tax year).

Naturally, you’ll want to pass on as much as possible to your loved ones, rather than paying 40% to HM Revenue & Customs (HMRC).

Are you worried your family could be left with an Inheritance Tax bill after you’re gone?

Here are 10 tips to pay less or avoid Inheritance Tax:

Potentially Exempt Transfers

One of the better-known ways to pass on wealth free from Inheritance Tax is to gift it more than seven years before your death. Of course, there is a degree of unpredictability in the outcome. If you were to die within seven years of making the gift, Inheritance Tax may be charged, though the rate will be reduced if more than three years have passed.

Personal Gifts

Gifts up to a certain value can be made free from Inheritance Tax, even in the last years of your life. Your allowance includes: large gifts totalling no more than £3,000; unlimited small gifts of up to £250; and wedding gifts of up to £5,000 for your children, £2,500 for your grandchildren, or £1,000 for others.

Gifts made within your regular pattern of income and normal expenditure (for example, quarterly payments towards a grandchild’s school fees from your annual income) can usually be made free from Inheritance Tax, although you may need to document this pattern for
three or more years.

Charitable Gifts

Gifts to registered charities can be made entirely free from Inheritance Tax, which can help you to reduce the size of your estate to within the Inheritance Tax threshold.

Additionally, if at least 10% of your total estate is gifted to charity, it will reduce the rate of Inheritance Tax payable on your remaining estate (above the nil-rate band) from 40% to 36%.


It is possible to take out a life insurance policy written in an appropriate trust that can provide a lump sum on your death to be used to pay the resulting Inheritance Tax bill. If this policy is within a trust, the lump sum paid out will not count towards your estate.

Insurance can also be taken out when making large financial gifts to cover the Inheritance Tax bill if you were to die within the following seven years (for example, before they are excluded from your estate). This is called a ‘term assurance’ policy.


Typically, though with some exceptions, pensions are excluded from the calculation of your estate and can be passed on free from Inheritance Tax. It is important to name a beneficiary to whom you wish to pass on your pension benefits.

It is also possible to make payments in your lifetime into another person’s pension, which will protect this money from Inheritance Tax. For example, you can set up a Junior Self-Invested Personal Pension for a grandchild under the age of 18 and pay in up to £2,880 a year. But they will not usually have access to this money until they reach age 55.

Discretionary Trusts

A discretionary trust can help you to reduce your Inheritance Tax liability by holding money in the name of your beneficiaries while you retain control. You can use your nil-rate band to pay in up to £325,000, which will be excluded from your estate after seven years. Funds above the nil rate band may attract a lifetime tax charge.

Loan Trusts

If you would like to protect your money in a trust but need to know you can withdraw it if you need it, it’s possible to loan money to a trust. You will always have the option to withdraw the original capital you loaned, but any growth on that capital will be protected within the trust from Inheritance Tax.

Discounted Gift Trusts

If you would like to earmark some wealth to be passed to a beneficiary or beneficiaries on your death, but you want any income generated to be paid to you in your lifetime, you can do this through a discounted gift trust. This will exclude the contents of the trust from your estate for Inheritance Tax purposes but still provide you with regular payments from it.

Business Relief

Business assets can usually be passed on either in your lifetime or after your death with Inheritance Tax relief of up to 100%. A business, interest in business or shares in an unlisted company will usually qualify for 100% Business Relief. Land, buildings and machinery related to the business will usually qualify for 50% Business Relief, as will shares controlling more than 50% of the voting rights of a listed company.

Agricultural Relief

If you own agricultural property (land or pasture used to grow crops or rear animals as part of a working farm), this can usually be passed on in your lifetime or after your death free from Inheritance Tax.

Time to Plan your Estate?

Inheritance Tax planning can be a complicated process, especially as rules and legislation seem to change every year. But with the right forward planning, it is possible to significantly reduce or even eliminate a potential Inheritance Tax liability. To identify the best ways to protect your assets for future generations, don’t delay. Contact us to discuss your options.

Market Update November Monday 8th 2021

Investors await signs at Fed’s Wednesday meeting of a move towards interest rate rises

The week started with markets hovering around record highs as investors awaited the latest responses by central banks to months of above-target inflation. US consumer price inflation has run at 5 per cent or more for five months, sparking bets of interest rate rises across government bond markets. German inflation is at a 29-year high after energy prices spiralled and global supply chains became choked up by pandemic-related shutdowns.

The S&P and the Nasdaq closed out their best month of the year on Friday as strong corporate earnings (companies listed on the MSCI World index of leading shares have beaten analysts’ forecasts by 10 per cent on average during this third-quarter earnings season, according to Bloomberg data.) dispelled fears that spiralling costs of commodities and industrial materials had hurt companies’ profitability. That marks a contrast from when global stock markets dropped back in September, as investors feared that price pressures caused by supply chain glitches would harm earnings.

Japanese equities had a particularly strong start to the week after the ruling Liberal Democratic party held its majority in Sunday’s Japanese parliamentary election, cementing hopes of more government stimulus spending to counteract the economic shocks of Covid-19.

Fed confirms taper to begin this month

On Wednesday, the US Federal Reserve (Fed) confirmed its long-telegraphed intention to shrink it’s $120bn-a-month Treasury and mortgage-backed bond purchases by $15bn a month. At the same time, chair Jerome Powell scotched concerns that the world’s most powerful central bank would respond to surging consumer prices with a rapid interest rate rise cycle.

This boosted US equity markets to all-time highs and on Thursday morning European stocks headed for their fourth session of all-time highs as they played catch up. US Treasury yields fell, and the curve steepened as a result as the market unwound from expectations of quicker Fed rate hikes.

Bank of England defies markets and keeps rates on hold

On Thursday, the Bank of England surprised the market and kept interest rates on hold, dashing investors’ expectations of a hike that would have made it the first of the world’s big central banks to raise rates after the COVID-19 pandemic. The move, following hawkish comments from some policymakers, sent the pound sliding by almost two cents, to below $1.35. It also triggered a rally in government bonds. Stocks also jumped, on relief that higher borrowing costs would not hamper the recovery.

The BoE expects UK inflation to hit 5 per cent next spring, but it has largely been driven by supply-side factors including Covid-19 disruptions to the production and movement of goods and higher energy prices.

Equities end their week wavering around record highs, boosted by dovish central bank policy

Most global equity bourses ended the period around record highs. At the time of writing, the regional European index, which has closed higher for nine of the last 10 sessions, ended the period up 1.72%. In the UK, the main index ended the period up 0.93% and over in the US, both the main index and the technology-focused US index ended the period at record highs up 1.62% and 2.85% respectively.

Asian equities ended the period flat and emerging markets equities were up 0.29%. Over in Japan, which had a particularly strong week, the main equity index ended the period up 2.01%.

Tough week for bond traders

This marked a week in which bond traders have been somewhat battered by dovish central bankers and US Job data out later today could compound this as the Fed Chair, Jerome Powell, said he won’t entertain interest-rate increases until the labour market heals itself, intensifying the scrutiny on all employment data. Global bond markets extended a rally that kicked off after the Bank of England’s surprise decision to keep interest rates on hold led traders to trim expectations policymakers will raise borrowing costs to cool inflation.

Short-end securities were hit the hardest, with Australia’s three-year yield tumbling toward its biggest weekly retreat in almost a decade (bond yields move inversely to price). Germany’s two-year yields fell to the lowest in two months and the U.S. five-year yield dropped to near a three-week low, as yields on similar-maturity UK gilts sank the most since the Brexit vote. The long-end fared better with the UK 10-year yield falling 0.13%, the German 10–year Bund yield falling -0.13 & and the US Treasury 10-Year Yield falling -0.01%.

OPEC Reject Biden’s plea to increase oil production

OPEC rejected President Biden’s pleas to hike production, instead OPEC + stuck to its original plan to raise oil production by 400,000 barrels per day in December. Saudi Energy Minister Prince Abdulaziz bin Salman blamed the shortfall on the knock-on impact from the tight gas markets. OPEC+ are concerned about the demand picture for next year as the cartel see a looming surplus on the horizon as inventories start building into Q1 next year.

At the moment inventories remain at very low levels, causing concern. The crude oil price steadied, however, as investors assess the response of the model OPEC + hike in production. At the time of writing Brent Crude ended the period at $81.12, down 3.86% and WTI Crude ended the period at $79.55, down 4.81%

Gold advances on dovish rate bets

Gold held the biggest gain in three weeks as traders pared their expectations for interest rate hikes after dovish turns from the Federal Reserve and Bank of England. Bullion is heading for a weekly advance, though remains below $1,800 an ounce at $1,795 at the time of writing, as central banks signal they’re preparing to rein in stimulus while balancing inflationary pressures and an uneven economic recovery. Silver, platinum and palladium all advanced. Focus turns to the US jobs report due later today to gauge the strength of the labour market, which could shift views on monetary policy once more.

In other news

World leaders are gathering in Glasgow for the highly anticipated COP26 climate summit. Delegates are being asked to accelerate action on climate change and commit to more ambitious cuts in their countries’ emissions, all in an effort to limit global temperature rises. The future of the planet is at stake but whether we get the action to match the pledges, only time will tell, but with more people now seeing climate change as a major issue, politicians will find this issue hard to ignore.

Pension Lifetime Allowance

How to stay within the limit to avoid a tax charge

If you’ve been diligently saving into a pension throughout your working life, you should be entitled to feel confident about your retirement. But, unfortunately, the best savers sometimes find themselves inadvertently breaching their pension lifetime allowance (LTA) and being charged an additional tax that erodes their savings.

If you are a high-income earner or wealthy individual, you could be putting too much into your lifetime pension and risk exceeding the pension lifetime allowance. The following questions and answers are intended to help you avoid this tax charge.

What is the lifetime allowance?

A: The LTA is a limit on the amount you can withdraw in pension benefits in your lifetime before you trigger an additional tax charge. By pension benefits, we mean money you receive from your pension in any form, whether that’s a lump sum, a flexible income, an annuity income or through any other method. This allowance applies to your total pension savings, which may be in different pensions.

How much is the lifetime allowance?

A: In the 2021/22 tax year, the LTA is £1,073,100. This allowance has now been frozen until April 2026.

What happens if you exceed the lifetime allowance?

A: Once you have received your full LTA in pension benefits, you will be required to pay an additional tax charge on any further benefits you receive. If you take your remaining benefits as a lump sum, you’ll pay a tax charge of 55%. If you take your remaining benefits as multiple withdrawals, you’ll pay a tax charge of 25% on each one.

How is the usage of your lifetime allowance measured?

A: Each time you access your pension benefits (for example, by purchasing an annuity, receiving a lump sum or establishing a flexible income), this is recorded as a ‘benefit crystallisation event’. There is an additional benefit crystallisation event when you turn 75, and finally, upon your death.

Is lifetime allowance protection available?

A: You can only protect your pension from the LTA if your savings were worth more than £1 million on 5 April 2016. You may be able to protect your pension savings up to £1.25 million, or up to the value of your pension on that date, depending on the type of protection you have.

Is it possible to avoid the lifetime allowance?

A: If you do not have LTA protection and you are approaching the limit, there are various actions you can consider. These include stopping your contributions (and, instead, investing your money into an alternative tax-efficient environment), changing your investment strategy or starting retirement earlier.

When should you seek professional advice?

A: The rules around the LTA are very complex and making the right decisions can feel difficult. Receiving professional financial advice will help to identify if you have a problem and offer different solutions to consider, based on a full review of your unique circumstances.

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Everyone deserves a great retirement. Your goals and ambitions are unique to you and we want to help you get there. To discuss your retirement plans, please contact us. We look forward to hearing from you.

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