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Month: December 2021

Generation Xers Chronically Under-Saving

57% Face Financial Difficulty In Retirement Years

According to The International Longevity Centre UK (ILCUK) report, a substantial proportion of Generation Xers (those born between 1965 and 1980) in the UK face financial difficulty in retirement, with one in three expected to face significant disadvantages.

Many 40-55-year-olds are reluctant to invest because they are frustrated by various financial stresses, such as coping with fluctuating incomes and balancing conflicting goals like childcare, loans and mortgages.

Multiple Financial Pressures

Generation Xers are chronically under-saving, with nearly one in three at risk of reaching retirement with inadequate incomes. The majority (57%) say they want to save more for
retirement but they cannot afford to because of multiple financial pressures.

Many are also unaware they are saving too little to achieve the level of income they desire: just 7% of those with a defined contribution (DC) pension are saving enough to achieve a moderate lifestyle in retirement.

No Pension Funds

More than half of those who contribute to DC pensions do so with less than 8% of their wages, and over half have substantial delays in their pension savings of at least ten years.

Of those who are employed, more than a quarter expect to rely on the State Pension for the bulk of or all their retirement money, or have no pension funds at all.

Additional Income In Retirement

COVID-19 has further disrupted people’s retirement plans, with one in five Generation Xers saving less or spending down their savings as a result.

Generation X is a very diverse cohort. Some subgroups in the age band are well prepared for retirement: almost 60% expect to have additional income in retirement, such as property wealth, other investments or savings, an inheritance or income from their partner or family.

High Risk Of Financial Difficulty

But other subgroups are at high risk of financial difficulty in later life, including those on benefits, the self-employed, low earners, renters and carers.

The pandemic has disproportionately influenced Generation Xers: they are the age demographic most affected by the pandemic, with 91,000 more older adults unemployed now than a year earlier. This is a year-over-year rise of more than 30%, and far more than in any other age demographic.

Uncertain About Retirement Plans

According to the ILCUK study, nearly 40% of Generation Xers are uncertain about retirement
plans, and few grasp the rate of investment needed to reach a secure retirement income. The findings of this report are really worrying and highlight the precarious financial future facing some of those in their 40s and 50s. Increased housing costs, insecure work and caring responsibilities risk leaving many without the savings they need for later life.

The pandemic has disproportionately influenced generation xers: they are the age demographic most affected by the pandemic, with 91,000 more elderly adults unemployed now than a year earlier. This is a year-over-year rise of more than 30%, and far more than any other age demographic.

Maximise Your Wealth Potential

Everyone’s situation is unique. This is why a personalised approach is important to help you, and your family, map out your goals and aspirations. Whatever the source of your wealth, there is an opportunity to maximise its potential through professional financial advice. To find out more, please contact us.

Weekly Market Update December Monday 20th 2021

Global equities on the back foot

Global equities started the week on the back foot as investors took profits ahead of a busy week of central bank meetings. These were expected to include further measures to combat high rates of inflation as a report indicated US wholesale prices rose at a record pace last month, increasing pressure on the Federal Reserve (Fed) to bring its bond purchase programme to an end. Investors were also grappling with almost daily updates on the effectiveness of vaccines against the Omicron coronavirus variant.

US stocks jump on Fed decision to accelerate taper

Wednesday’s hawkish update from the Fed indicated that US interest rates were now expected to rise three times in 2022. The Fed also said that it would begin cutting its bond purchases by $30bn a month in January, double its previous pace. Investors, however, were not put off by the prospect of reduced direct market stimulus from the Fed, and instead focused on the message that the central bank would not let inflation spiral out of hand and equity markets rallied as a consequence.

This meeting of the Fed was extremely important as it took place just after Jerome Powell removed the term “transitory” from his definition of inflation. Expectations were heightened by the fact that producer prices for November rose nearly 10%. The last time US inflation was at such a level, US interest rates were in double digits.

US technology stocks slide after central bank policy shifts

The rally was short-lived as US technology stocks slid after central bank policy shifts. The declines in US stocks on Thursday, however, stood in sharp contrast to rallies in European and Asian stocks earlier in the day. The Bank of England’s Monetary Policy Committee voted 8-1 to increase rates by 0.15 percentage points to 0.25 per cent, surprising some economists who had expected the bank to hold fire given the rapid spread of the Omicron coronavirus variant. The Committee also voted unanimously to maintain the stock of UK government bond purchases. Over in Europe, policymakers at the European Central Bank (ECB) also confirmed on Thursday plans to end net purchases under the central bank’s pandemic-era bond-buying programme next March. Policymakers in the UK and the Eurozone are extremely concerned with the soaring inflation in the regions and these measures are deemed necessary to combat this rising inflation.

As of 12pm on Friday, London time, US equities fell 0.9%, however, US technology stocks had a much tougher week, falling by 2.9%. European stocks fared better falling by 0.4% and UK equities fell by 0.4%. Japanese equities increased by 0.5%, and Emerging markets fell 1.2%.

Governments Bonds

After the Fed’s hawkish tone, US Treasuries started to rise again after falling earlier in the week, with the 10-year Treasury yield, which moves inversely to price, ending the period down 0.07% at 1.41%. In the UK, the 10- year Gilt yield was up 0.02% at 0.758% and there was a very small move in the German 10-Year Bund yield which declined 0.02% to end the period at -0.367%.

Crude Oil

Crude oil prices fell over the week on Covid concerns but rallied on Thursday in the face of a weaker dollar and a larger-than-expected drop in US crude reserves. According to the latest report from the Energy Information Administration, US commercial crude reserves fell by 4.6 million barrels in the week ending December 10, almost triple what analysts had expected. Brent Crude ended the period at $73.74 USD down 1.88% with WTI Crude falling 0.77% at $71.12 USD.


Gold ended the period up 1.42% at £1,810.10 as US dollar weakness backed by the downbeat Treasury yields boosted the metal’s price.

Omicron update

South Africa’s health minister said on Friday that the government believes that vaccines and high levels of prior Covid-19 infection are helping to keep disease milder in a wave driven by the Omicron variant.

Anecdotal reports suggest that the Omicron variant driving the fourth wave, which saw the country report a record number of daily infections earlier this week, is causing less severe illness than previous variants in South Africa. Over in the UK, prominent scientist Professor Tim Spector said Omicron appears to produce a “fairly mild” illness with most people recovering “after about five days”. It is too early to draw firm conclusions but early signs indicate that Omicron could be a much milder albeit, more transmissible variant. Early data also suggest that three vaccine doses are extremely effective in slowing transmission and avoiding serious disease with booster programmes accelerating globally. Governments are keen to avoid lockdowns but restrictions are inevitable until we have more clarity.

Market Update December Monday 13th 2021

Markets bounce back as investors reassess the risk of Omicron

Equity markets bounced back this week, as a combination of factors eased fears as to the likely impact of the Omicron covid variant. Data out of South Africa continued to suggest that the variant induces less serious illness versus previous covid strains, whilst Pfizer/BioNTech said that early trials show that a third vaccine booster shot is effective against Omicron. Despite this, whilst there remains some doubt as to the impact of the Omicron variant, some countries have tightened restrictions, with a corresponding impact on businesses, particularly within the leisure sector, leading to renewed weakness in markets towards the end of the week. All eyes are on the release of US inflation data later today, with expectations that inflation will have risen to 6.8% year-on-year in November, whilst weekly filings for unemployment benefits fell to 184,000 in the week to the 4th of December, the lowest level since 1969.

As of 12pm on Friday, London time, US equities rose 2.8%, having been within just 0.1% of their all-time high mid-week. Similarly, US technology stocks bounced by 2.9%. European stocks increased by 2.9% and UK equities rose 2.6%, however, sterling fell to USD 1.32, its lowest level in over a year. Japanese equities increased by 0.9%, Australian stocks were up by 1.6% and Emerging markets climbed 1.9%.

Government bonds give back

Government bonds gave back some of their near-term gains, with the yield on the 10-year US Treasury, which moves inversely to price, rising to 1.51%. There was a smaller move in German bunds and UK gilts, but nonetheless, prices fell, with yields now standing at -0.34% and 0.78% respectively.

There was a strong rally in crude oil prices, with Brent climbing by 7.5% to $75.1 a barrel and US WTI (West Texas Intermediate) rising by 8.2% to $71.7. Iron ore also increased by 6.5%, whilst copper, which has barely been troubled by concerns over Omicron in recent weeks, increased by 1.7% to $9,540 a tonne. Gold is now trading at $1,772 an ounce, a fall of 0.6% over the week.

Evergrande, the world’s most indebted property developer, defaults on bond interest payments

The world’s most indebted property developer, Chinese company Evergrande, defaulted this week as it missed a coupon payment on Monday, having failed to pay $82.5m to investors. Subsequently, the rating agency Fitch downgraded the company to “restricted default”. Although investors were reminded that it is far from the only Chinese property company in a precarious position, as Kaisa also failed to repay a $400m bond that matured on Tuesday. On Monday, the People’s Bank of China, unleashed $188bn of liquidity into the financial system in order to limit the risk of contagion.

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.

Let us help you make the most of your money – and your future

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.

Weekly Market Update December Monday 6th 2021

The threat of Omicron collides with the threat of tightening monetary policy

It has been a volatile week for markets as investors wait for further clarity on the potential impact of the Omicron covid variant. Markets oscillated between falling on concerns that current vaccines may prove to be less effective against the new variant, whilst rallying as investors sort out bargains whilst betting that Omicron proves to be a milder strain of the virus. Amidst this noise, Jay Powell, chair of the US Federal Reserve (Fed), about turned on their patient approach to inflation, dropping the term ‘transitory’ from their rhetoric, whilst signalling a willingness to accelerate the tapering of their $120 billion a month bond purchasing programme.

As of 12 pm on Friday, London time, US equities were down 0.4%, whilst US technology stocks fell 0.7%, with the latter underperforming the wider market as, unlike last year, fears of rising inflation and interest rates surpassed fears of further covid induced lockdowns. European equities rose 0.1%, held back by governments introducing tougher social mobility restrictions in order to slow the spread of the new Omicron variant. Whilst, in contrast, UK equities rose over 1%, with both large-cap international stocks and mid-cap domestic stocks performing strongly. Japanese equities were down 1.4%, Australian stocks fell 0.5%, whilst emerging markets rose 1.1%.

Short-dated government bonds sell-off on expectations of US tapering

Government bonds, having rallied at the start of the week, sold off on the back of Jay Powell’s seemingly hawkish statement on monetary policy, before rallying towards the end of the week. 10-year US Treasuries are now trading at a yield of 1.42%, slightly down on the week (with yields moving inversely to prices), whilst 2-year Treasuries, which are much more sensitive to interest moves, s off over the week, with the gap between 2-year yields and 30-year yields narrowing by the most since March of last year.

This is an indication that bond markets are increasingly expecting interest rates to rise soon, with the global economy commensurately slowing down. 10-year German Bunds are currently trading at -0.37% and UK gilts 0.78%. Gold sold off by 0.8% over the week, as markets priced in rising real interest rates (interest rates minus the rate of inflation).

Crude oil falls further as Opec+ agrees to increase production

Crude oil fell further, with Brent crude now trading at $71.3 a barrel and US WTI (West Texas Intermediate) $68.0, as Opec+ (Organisation for Petroleum Exporting Countries plus Russia) agreed to increase their production by 400,000 barrels a day in January, despite the threat of Omicron on the global economy.

Confused picture as to the effectiveness of existing vaccines against the new Covid variant

The week began with the chief executive of US vaccine manufacturer, Moderna, saying that he expected existing vaccines to be less effective at tackling Omicron versus earlier strains of covid. However, this was somewhat contradicted later in the week when the University of Oxford and BioNTech, the two organisations behind the AstraZeneca and Pfizer vaccine respectively, said they expected existing vaccines to continue preventing severe disease, even in the case of the new variant.

It will be up to a further two weeks before it is known conclusively what the impact of Omicron on the global economy is likely to be, meaning volatility in markets is expected to remain elevated. The VIX index, a measure of volatility on the US equity market, rose above thirty this week, versus its long-term average of twenty.

US jobs data due to be released this afternoon

Markets are now waiting for the latest non-farm payrolls jobs numbers from the US, due to be released this afternoon, with an expectation of 550,000 new jobs having been created. This continues to be a key focus for investors trying to ascertain when and by how much the Fed is likely to tighten monetary policy.

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