Financial Planning, Pensions Advice, Financial Adviser Dunfermline, Fife, Edinburgh and Central Scotland

Monday 27th January 2020

As we enter a new decade, you may be looking back on the last ten years. Hopefully, you’ve reached a few goals and taken steps towards them. But, if you have a look at how your savings accounts have performed throughout the 2010s, you could be a little disappointed.

Since the 2008 financial crisis, interest rates have been historically low in a bid to encourage spending and get the economy going. If you’ve had debt, whether a loan or a mortgage, it’s been good news as borrowing has been cheaper. However, if you’ve been saving over the last decade, you probably haven’t seen much return for your efforts.

For the first five years of the last decade, the Bank of England held interest rates at just 0.5%, far below the historical average. Then in August 2016, it dipped even further to 0.25%. Since then, two increases, in November 2017 and August 2018, has taken it to 0.75%, where it remains today.

There are suggestions that the Bank of England could make another increase in the coming months. But the economy continues to be sluggish and Brexit uncertainty is having an impact, so we could see low interest rates continue into the future too.

What impact do low interest rates have?

Prior to the financial crisis, savers were accustomed to earning 5% or more on their savings. It means your savings would have grown at a much faster pace in the 90s and early 00s.

That’s frustrating enough. But the real impact of low interest rates isn’t evident until you start looking at inflation over the same period.

The Consumer Price Index (CPI) measures inflation (the cost of living) in the UK. The table below highlights how the cost of living has increased.

Year Inflation rate
2010 3.3%
2011 4.5%
2012 2.8%
2013 2.6%
2014 1.5%
2015 0%
2016 0.7%
2017 2.7%
2018 2.5%

Whilst there have been points where your savings may have benefitted from interest rates higher than inflation, most notably 2015, for the most part, inflation has outpaced the Bank of England’s base rate.

But what does this mean on your savings? Where the interest rate of your savings matches inflation, the value of your money has effectively stayed the same. This means it holds the same spending power. However, where inflation is higher, your money has lost value in real terms.

It can be difficult to fully understand the effects of inflation, especially when you look over a relatively short period of time. The Bank of England’s inflation calculator demonstrates how the cost of living rises.

Let’s say you had £10,000 in 2010. To have the same spending power in 2018, you’d have to find an extra £2,595.53, something saving accounts are unlikely to have delivered due to the low-interest rates.

That sum may not seem like much on the face of it. But the effects of inflation become clearer when you look at the long term. A £10,000 lump sum in 1990 would need to have grown to £22,327.64 by 2018 to be worth the same in real terms, for example.

So, with interest rates still low, how can you grow your wealth in the 2020s? Investing may be an option worth exploring.

Should you consider investing?

First, investing isn’t the right option for everyone looking to grow their savings.

You should only invest with a long-term timeframe in mind. If you’re likely to want access to your savings within the next five years, investing probably isn’t the right option for you. It also means investing isn’t right for savings such as your emergency fund.

Yet, there is certainly an argument for investing if you want to grow your wealth over the long term.

Historically, stock markets have outpaced inflation. As a result, this gives you an opportunity to not only maintain your spending power but see it increase over the long term. For individuals that have the capital to invest, it could help your money grow at a quicker pace and provide you with security in the future.

Keep in mind that all investments come with risk. There is a chance that your initial investment will go down in value. You should carefully consider your risk profile before you start investing. This should take several factors into consideration, including your current assets, capacity for loss and goals.

You all need to be comfortable with volatility within the investment market. Values of stocks and shares fluctuate, it’s important that you stick to your long-term investment plan and carefully assess changes rather than making knee-jerk reactions should values fall.

If you’d like to discuss your wealth and what steps you can take to grow it over the next decade, please get in touch.

Please note: 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.

The current tax year is almost over. Our handy checklist is designed to help you get the most out of your money and allowances for 2019/20. If you haven’t already, these are seven things you should do before the new tax year starts, otherwise, you could lose some of your allowances.

1. Make use of your ISA allowance

ISAs are a great way to save and invest. Each year you can add up to £20,000 into ISA accounts, and you won’t have to pay tax on interest or returns. If you have the capital and haven’t reached the allowance limit yet, it’s worth making some additional deposit in the coming months.

When using an ISA, you have two main options:

  • Cash ISA: A Cash ISA pays interest on your deposits. Your money is secure and protected under the Financial Services Compensation Scheme, assuming you stay within the limits. However, interest rates are low, and you may find that the value of your savings decreases in real terms once you consider inflation.
  • Stocks and Shares ISA: With this type of ISA, your money is invested in stocks and shares. This gives you an opportunity to create returns that outpaces inflation. However, there is a risk that investment values will fall. It’s important to keep in mind that you can choose the level of investment risk you want to take.

There are other ISAs too, which can be useful in certain circumstances. A Lifetime ISA (LISA), for example, may be valuable if you’re saving for your first home, whilst an Innovative Stocks and Shares may be suited to those with a high net worth and high-risk attitude to investing.

You can split your annual allowance between several ISA accounts, should you choose to, including different account types. As a result, you can both save in cash and invest each tax year.

If you don’t use your ISA allowance before the end of the tax year, it will be lost.

2. Top-up your pension

Your pension is a tax-efficient way to save for retirement. However, there is an annual limit to keep in mind. You can pay in more than the annual allowance, but this won’t qualify for tax relief and you may find you face an unexpected tax bill as a result. If you’ve yet to reach your pension annual allowance and you have the capital to invest long term, it can be worthwhile to top it up.

Your annual allowance will depend on how much you earn. Usually, it is £40,000 or 100% of your annual earnings, whichever is lower. This includes the contributions you make, as well as those made by your employer or other third parties.

However, if you’re a higher rate taxpayer, you may be affected by the tapered annual allowance. If you earn more than £150,000, your annual allowance will reduce by £1 for every £2 you earn over this threshold. The maximum reduction is £30,000. So, if you earn £210,000, your annual allowance would be just £10,000.

Crucially, your pension annual allowance can be carried forward by up to three years. So, if you didn’t make full use of your allowance in the previous three years, you can make further contributions.

3. Provide a gift to loved ones

If Inheritance Tax is a concern for you, using your gifting allowance is one way to pass wealth on to your loved ones now.

If the entire value of your estate, this includes all your assets, such as property, savings, investment and material assets, is more than £325,000, your estate may be liable for Inheritance Tax. Gifts that are given within seven years of your death may also be included in your estate for Inheritance Tax purposes unless they are part of the gifting allowance.

Each tax year you can gift up to £3,000 without having to worry about Inheritance Tax; it will be immediately considered outside of your estate. If you didn’t use this allowance, it can be carried forward for one year. So, if you didn’t make use of the gifting allowance in 2018/19, now is your last chance to do so.

Are you worried about Inheritance Tax? There are often steps you can take to minimise liability and ensure you pass as much as possible on to loved ones, please get in touch to find out more.

4. Utilise the Capital Gains Tax allowance

Capital Gains Tax (CGT) is a tax you pay when you sell certain assets and make a profit. This could include a Buy to Let property or investments that aren’t held in an ISA.

The rate of CGT will depend on the asset you’re selling but it can be as high as 28%. However, each tax year, you can make up to £12,000 profit without being liable for CGT. As a result, timing when you make a sale could save you money.

If you don’t make full use of your CGT allowance, you aren’t allowed to carry it forward to next year.

5. Consider the dividends allowance

If you own shares in a company and receive dividend payments, you may need to pay a tax on this if you’ve already used your allowance. The rate of dividend tax will depend on your tax band. For basic rate taxpayers, it’s just 7.5%. However, if you’re a higher rate or additional rate taxpayer, the dividend tax rate increases to 32.5% and 38.1% respectively.

The dividend tax allowance for the current tax year is just £2,000 after it was decreased from £5,000 in 2017/18.

The dividend allowance doesn’t apply to shares held within an ISA. Dividend payments can also use your annual Personal Allowance. This is the amount you can earn from all sources of income tax-free in a single tax year, it’s currently £12,500.

6. Fill in National Insurance gaps

Your National Insurance contributions play a role in how much State Pension you receive. To be entitled to the full State Pension, which will be £9,110.40 annually for 2020/21, you must have 35 years on your National Insurance record.

Why is this important as the end of the tax year approaches? You can make additional contributions to cover gaps going back over the last six years, with the deadline by the end of each tax year. If you have gaps that could affect your State Pension, it’s often worthwhile making these additional payments to receive the full amount. Keep in mind though, if retirement is still some way off, you may still hit the 35 required without making extra contributions.

7. Build a nest egg for children and grandchildren

It’s not just your own allowances that reset at the start of a new tax year. Those that affect saving for children do too.

If you’re putting money away into a Junior ISA (JISA), for example, you should maximise the amount you can tax-efficiently save if possible. Each tax year, you can add up to £4,260 into a JISA. As with an adult ISA, the interest from a Cash JISA or returns from a Stocks and Shares ISA are tax-efficient. The JISA allowance can’t be carried forward, so if you don’t use it, it’ll be lost. Money paid into a JISA is locked away until the child turns 18 when they’ll be able to access it as they wish.

You can also pay into a child’s pension. Individual’s that don’t earn an income, including children, can add up to £2,880 to a pension each tax year and benefit from tax relief. Deposit the maximum amount and tax relief effectively means your investment grows to £3,600 instantly. Pension contributions won’t be accessible until the child reaches retirement age. At the moment, pensions can be accessed at 55, but this is rising.

If you’d like to discuss your allowances as the end of the tax year approaches, please contact us.

Please note: 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.

The value of your investments 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.

If you’re claiming the State Pension, the good news is that it’ll increase in the new tax year. It could mean you have some extra money to spend on luxuries or that you can reduce how much you’re withdrawing from your Personal Pension. Even if you have other retirement provisions, your State Pension is likely to be an important part of your retirement income.

The State Pension for 2020/21

Millions of pensioners will receive a 3.9% pay rise in April 2020 thanks to the triple lock guarantee. For pensioners receiving the full weekly State Pension, the increase equates to £343.20 annually. That may not sound like a lot, but it helps your retirement income keep pace with inflation and maintain your spending power.

  Weekly State Pension Annual State Pension
2019/20 tax year £168.60 £8,767.20
2020/21 tax year £175.20 £9,110.40
Change + £6.60 + £343.20

As mentioned above, the rise is thanks to the triple lock guarantee. This protects the State Pension and means payments are increased each year. The rate of growth is whichever measure is the highest from:

  • Consumer Price Index (CPI), which tracks inflation
  • Average earnings growth
  • Or 2.5%

As September’s CPI measure was 1.7% and average earnings growth was recorded at 3.9%, it’s the latter the State Pension rises by. The triple lock guarantee has been in place since 2012, guaranteeing that pensions will rise by at least 2.5% each tax year.

The table below demonstrates how the State Pension has increased over the last nine tax years and which measure has been used.

Tax year State Pension increase Measure
2012/13 5.2% CPI
2013/14 2.5% Guaranteed minimum
2014/15 2.7% CPI
2015/16 2.5% Guaranteed minimum
2016/17 2.9% Average earnings
2017/18 2.5% Guaranteed minimum
2018/19 3% CPI
2019/20 2.6% Average earnings
2020/21 3.9% Average earnings

Receiving a portion of the State Pension

In order to receive the full State Pension, you must have a full National Insurance record.

If you reached State Pension age before April 2016, this means you need 30 years of National Insurance contributions. If you retired after this point, you need 35 qualifying years of contribution and at least ten to receive any State Pension at all.

Should you have missing years on your National Insurance record, you’ll receive a portion of the State Pension. Your State Pension will still increase annually, based on the percentage rises of each year, but in terms of extra money in your pocket, it will be less than those with a full State Pension.

If you’ve yet to claim your State Pension but would like to understand what you may receive, you can get a forecast here.

Why your State Pension is important

When planning your retirement, your State Pension alone is unlikely to provide you with enough income to meet all aspirations. But that doesn’t mean it’s not an important part of the retirement planning process.

The State Pension can provide a useful foundation for building your retirement income. As it’s guaranteed for life and reliable, it’s an income source that can provide you with security. The triple lock guarantee can also help retirees stave off the impact inflation has on their income.

If you have a Defined Contribution pension and don’t intend to purchase an Annuity, this is particularly useful. As you may be accessing your pension flexibly and leaving the bulk of your savings invested, having a secure source of income can provide you with peace of mind in retirement. A State Pension might not be enough to meet aspirations, but it can ensure the essentials are taken care of.

Whatever your retirement income and other provisions, you shouldn’t dismiss your State Pension when planning your future.

Please get in touch if you’d like to talk to us about your retirement plans. It can be challenging to bring together all the different income strands, but we’re here to provide assistance. We’ll work with you to create a clear retirement plan that puts your goals at the centre.

Thousands of investors have been sucked into putting their money into unsuitable mini-bond products following extensive advertising, particularly on social media. The Financial Conduct Authority (FCA) has now clamped down on the marketing of such products following a scandal. But many are likely to lose their money.

What is a mini-bond?

A mini-bond is effectively an IOU where you lend money directly to businesses, receiving regular interest payments over the term of the bond. However, the money you make back is based entirely on the firms issuing them and not going bust. As a result, they aren’t suitable for most investors. If the business collapses, you’re not guaranteed to receive your money back. Mini-bonds are not normally protected under the Financial Service Compensation Scheme (FSCS) either.

The London Capital & Finance scandal highlighted this.

Around 11,500 bondholders poured £237 million into London Capital & Finance after being promised returns of 6.5% to 8%. The investment opportunity was advertised extensively, including on social media platforms. This meant it reached a wide range of investors, including those it may not be suitable for. The firm collapsed in January 2019 and investors could lose all their money tied up in the mini-bonds. For some investors, it could mean losing their life savings or having to adjust plans significantly.

Coming into force on 1 January 2020 and lasting for 12 months, the FCA has banned mass marketing of speculative mini-bonds to retail customers. Over the course of the year, the regulator will consult on making the ban permanent.

Andrew Bailey, Chief Executive of the FCA, said: “We remain concerned at the scope for promotion of mini-bonds to retail investors who do not have the experience to assess and manage the risk involved. The risk is heightened by the arrival of the ISA season at the end of the tax year, since it’s quite common for mini-bonds to have ISA status, or to claim such even though they do not have the status.”

As a result, speculative mini-bonds can only be promoted to investors that firms know are sophisticated or high net worth.

Learning from the mini-bond scandal

The FCA ban aims to protect investors, but some lessons can be learnt from the mini-bond scandal too.

1. Make sure you understand your investments

Investments can be confusing, but you should ensure you understand where your money is going before parting with your cash. Taking some time to do your research can give you more confidence in your decision and reduce the risk of choosing products that aren’t right for you. If you’d like to discuss an investment opportunity and how it fits into your plans, you can contact us.

2. Ensure investments are authorised and regulated

Investments that are regulated and authorised by the FCA can provide you with protection. The regulation around mini-bonds is much less stringent than for listed bonds. What’s more, a business does not have to be regulated by the FCA to issue mini-bonds. As a result, they aren’t suitable for most retail investors. Even when a business claims to have regulations, it’s worth checking this is true and understanding what protection this offers you, if any.

3. Make sure investments fit your risk profile

Mini-bonds are considered a high-risk investment. That means there’s a greater chance your returns could be less than your initial investment or that you lose all your money. Your risk profile should consider a range of different areas, such as your capacity for loss, investment goals and other assets. In many cases, the risk associated with mini-bonds would be too high for typical investors.

4. Be mindful of scams

Financial scams are rife, and the mini-bond scandal highlighted why it’s important to carry out due diligence. Some mini-bonds falsely claimed to have ISA status, making them more tax efficient. This could mean some investors face unexpected tax charges. However, this claim could also lead investors into making a decision that’s wrong for them. ISAs are commonly used products and considered ‘safe’, in contrast to mini-bonds.

5. Don’t rush into making decisions

When you see an ad with an enticing offer, it’s easy to react straight away. However, carefully considered decisions are far more appropriate than impulse ones when it comes to investing. Don’t rush into making investment decisions. Instead, take some time to think about what your options are, and which is most appropriate for you.

6. Be realistic about investment performance

With some money bonds claiming to be low risk whilst offering returns of 8%, it’s easy to see why retail investors were tempted. But investments with higher potential returns will carry higher levels of risk too. When assessing investment opportunities, be realistic. Here, the old saying rings true: if it sounds too good to be true, it probably is.

Please contact us if you have any questions or concerns about your investment portfolio. Our goal is to ensure each of our clients is comfortable with their investments, and wider financial plan, including the level of risk involved.

Please note: 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.

Managing pension contributions and tax liability can be tricky. If you’re affected by the tapered allowance, it can be even more challenging. The Secretary of State for Health and Social care has announced there will be a review into the impact of the tapered allowance and its impact on NHS staff. But it’s not just NHS staff that should ensure they understand how it works.

What is the tapered annual allowance?

When you’re saving into a pension there are two allowances you need to keep in mind: the annual allowance and the lifetime allowance. These two allowances limit how much you can save tax-efficiently in a pension. As the name suggests, the annual allowance dictates how much tax relief you can receive in a tax year, whilst the lifetime allowance refers to the total amount over your working life.

For the 2019/20 tax year, the annual allowance is a maximum of £40,000. However, it’s not as simple as having an allowance that applies to every worker. In some cases, your allowance may be significantly lower. One of the reasons for this is the tapered annual allowance.

If your threshold income if over £110,000 or your adjusted income is over £150,000, you could be affected by the tapered annual allowance.

First, what are the definitions of threshold and adjusted income?

  • Threshold income is your annual income before tax, less any personal pension contributions and ignoring any employer contributions
  • Adjusted income broadly covers all income that you are taxed on, this may include dividends, savings interest and rental income before tax, plus the value of your own and any employer pension contributions

Next, how much is your annual allowance reduced by? For every £2 your income exceeds the threshold, your annual allowance will reduce by £1. The maximum reduction is £30,000. This means some workers can be left with an annual allowance of just £10,000.

Exceed your annual allowance and your pension contributions will not be legible for tax relief. This could mean an unexpected tax bill if you aren’t aware of your pension position. It’s worth noting that unused annual allowance from the previous three tax years can be carried forward.

NHS: Bringing the tapered annual allowance to the forefront

The tapered annual allowance has been featuring in the news due to the issues it’s causing in the NHS. High earners within the NHS have found they can face an unexpected tax bill if they work overtime or receive a pay increase. This has led to some senior members of staff turning down additional work over fear they will need to pay out more.

As a result, Matt Hancock, Secretary of State for Health and Social Care, has stated there will be an ‘urgent review’ into the tapered annual allowance for pension relief. Solutions put forward so far include allowing NHS staff to flexibly change their accrual rate and adjust it where necessary to reflect earnings.

Whilst the review is good news for NHS staff, there haven’t been any suggestions that it could be extended to other industries. However, some are calling for the tapered annual allowance to be scrapped altogether.

Steve Webb, Director of Policy at Royal London, said: “The tapering of the annual allowance has caused major problems in the NHS. All year we have been hearing of doctors who are restricting their hours to avoid the risk of large lump sum tax bills.

“The tapered annual allowance is complex and makes it very hard for taxpayers to know where they stand. The solution is to abolish the taper outright, even if this means a lower across-the-board annual allowance for all.”

Managing your annual allowance

If you’re affected by the tapered annual allowance, it’s important you manage your pension contributions. This can help make the most of your savings and reduce your tax liability.  There are several key things to do if you’re worried about the annual allowance.

1. Understand your annual allowance: The first step is to make sure you understand exactly what your annual allowance is. This can be difficult if you’re affected by the tapered annual allowance. But it means you can control your pension contributions, so you don’t face an unexpected bill and maximise your retirement savings.

2. Make use of carried forward allowance: If you’ve recently been affected by the tapered annual allowance, carried forward allowance could help you save more tax efficiently. If you don’t use unused allowance from previous tax years, they will disappear after three years.

3. Manage contributions: Actively keeping an eye on your pension contributions is important if you may exceed your annual allowance. You can adjust or even pause your contributions to ensure you don’t pay avoidable tax.

4. Work with a financial planner: A financial planner can help you make the most out of your savings. If you’d like to maximise pension savings whilst mitigating avoidable tax on contributions, please get in touch. We’ll work with you to create a bespoke financial plan that considers your personal circumstances, including the tapered allowance where necessary.

Please note: 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.

Pensions are a crucial part of planning for retirement. But how do pensions in the UK compare to the rest of the world and how can you make the most of your savings?

Australian research has compared the pension systems of 37 different countries. It assessed a range of different indicators, from savings through to operating costs. It looked at both social security systems and private sectors. The report aims to inform pension decisions. It notes that ageing populations are placing pressure on governments around the world.

So, how did the UK do?

After all the indicators are considered, the UK ranks 14th, earning a C+ grade. Whilst that’s not bad, it certainly suggested that there’s room for improvement. In fact, the research suggested that there are major risks and shortcomings that should be addressed to improve efficacy and long-term sustainability.

At the top of the table were the Netherlands and Denmark, both earning an A grade, followed by Australia with a B.

How can the UK pension system improve?

The good news is that the UK is already taking steps to improve its pension score. The UK’s overall score increased from 62.5 to 64.4 in the last year. This boost was partly due to auto-enrolment and increased minimum contribution levels. But, whilst a step in the right direction, the report identifies areas that could be improved. These include:

  • Increasing the coverage of auto-enrolment: The majority of employees are now covered by auto-enrolment, it misses out some key groups. This includes the self-employed and some part-time workers.
  • Raising minimum contribution levels: The current minimum contribution level is 8% of pensionable earnings. This is made up of employee and employer contributions. Whilst better than not saving into a pension, this falls below recommended saving levels to maintain lifestyles.
  • Require retirees to take some of their pension as an income stream: Since 2015 retirees have had more freedom in how they access their pension. Should they choose to, they can withdraw it as a single lump sum, for example. However, the report recommends restoring the requirement to take part of retirement savings as an income stream.
  • Raising household saving: The report also highlighted saving levels compared to household debt. Having debt in retirement can have a significant impact on lifestyle and income.

How do pensions in the Netherlands and Denmark differ?

Looking at the overall results of the research, the UK falls within the middle. But how does it compare to those that claim the A ranking?

  • The Netherlands: Most employees in the Netherlands belong to occupational schemes that are Defined Benefit plans. Defined Benefit (DB) pension schemes offer a guaranteed income in retirement. This is often linked to years of service and working salary. This gives retirees certainty and means they take less responsibility for their pension income. There are DB schemes available in the UK but the number of these is falling. This is due to the cost of administering them rising as life expectancy rises. As a result, Defined Contribution (DC) schemes are more common in the UK. The income delivered from a DC pension depends on contribution levels and investment performance. Therefore, they offer less security in retirement.
  • Denmark: Like the UK, most pensions in Denmark are DC schemes. However, there are some key differences. Everyone that works more than nine hours in Demark between the ages of 16 and 67 must contribute to the supplementary pension fund. This means coverage is larger than auto-enrolment in the UK. Employees can also not opt-out of ATP. Another crucial difference is that after saving through ATP, a pension is then paid in instalments once you reach retirement age. This provides a stable income throughout retirement. In contrast, UK pensioners can choose how and when they make pension withdrawals once they reach the age of 55.

Taking control of your pension

The UK might not come out top of the research. But that doesn’t mean that you can’t take steps to ensure you have the retirement you want. Setting out your goals and careful planning can help you secure the retirement you want. If you’re worried you’ll face a pension shortfall, among the steps to take are:

  • Assess how far your current saving habits will go: Hopefully, you’re already paying into a pension or making other provisions for retirement. Assessing how this will add up between now and retirement is crucial. You should also look at the level of income it will deliver annually.
  • Increasing contributions: If you’ve been auto-enrolled into a Workplace Pension, it’s likely you’re paying the minimum contribution levels. However, this often isn’t enough to achieve retirement dreams and you can increase contributions. In some cases, your employer will increase their contributions in line with yours.
  • Understand your investments: If you have a DC pension scheme, your contributions will usually be invested. This helps your savings to grow. But how much risk should you take and what performance can you expect over the long term? Getting to grips with how your pension is invested can help you make decisions that are right for you.

Please get in touch if you’d like to discuss your current pension and retirement plans. We’d be happy to help you understand whether you’re on track and the lifestyle you can look forward to in retirement.

Please note: 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.

We all like to think that we could spot a scam. But scammers are often sophisticated and it’s easier than you think to fall for their claims. The Financial Conduct Authority (FCA) has recently highlighted some of the most common tactics fraudsters use to try and get their hands on your pension with a quiz.

Falling victim to pension scammers can be devastating. Often it will mean losing a lifetime of savings and the financial security you’ve been working towards over your career. According to the FCA, the average victim will lose £82,000 as part of a pension scam, a sum that takes 22 years to save up. Whilst there is a chance that your savings will be recovered this often isn’t the case. Being targeted by a scammer could mean your retirement plans are left in tatters.

Could you spot a pension scam?

Despite 63% of pension savers confident in their ability to spot a scam and protect their savings, a survey reveals that some are overconfident. The same portion would trust someone offering pension advice out of the blue, one of the red flags of a scam. What’s more, a fifth of people would be keen to take up an offer of accessing their pension, another clear sign of scammers.

Psychologist Honey Langcaster-James said, “Scammers employ clever techniques such as seeking to establish ‘social similarity’ by faking empathy and a friendly rapport with their victims. That can win your trust in a short space of time and by engaging with them you leave yourself vulnerable to losing a lot of money very quickly. People need to know how to spot the signs of a scam so they don’t fall for psychological tricks.”

Take the FCA quiz and find out how savvy you are at spotting pension scams.

7 pension scam red flags

1. Unsolicited contact

Being contacted out of the blue is one of the key warning signs of a scam. In early 2019, a pension cold calling ban was implemented. This means that reputable firms won’t contact you if you haven’t requested it or been in touch with them first. If any form of contact is unexpected, including text messages or emails, it’s best to ignore there. If you want to learn more about the offer, check the FCA register and contact the firm directly with the details listed.

2. An offer of a free pension review

Reviewing your pension seems like a sensible thing to do. Whether you want to review investments or understand the income it will generate at retirement, it can be tempting to seek professional help. However, ‘free pension review’ is a term that fraudsters often use. Ask yourself why valuable financial advice is free and be sure to check the credentials of any firm before handing over personal or sensitive information.

3. Claims of unlocking your pension early

Being able to access your pension early may sound appealing. But, unfortunately, it’s a sign of a scam. Most pensions become accessible from the age of 55 and to do so before will result in hefty penalties. Unlocking your pension early is only penalty-free in exceptional circumstances, such as following a terminal diagnosis. In these cases, you should contact your pension provider directly or speak to a trusted financial adviser that you’ve worked with in the past.

4. Pressured sales tactics

Scammers want to get their hands on your money as quickly as possible, leaving you little time to think through your decision. For this reason, they deploy high-pressure sales tactics. This may be offering time-limited offers or pressuring you into making a snap decision, such as saying a courier is bringing the paperwork to you immediately. Pension decisions can affect your security for the rest of your life. Don’t be pushed into making quick decisions and give yourself time to consider the implications.

5. Claims of low risk, high return investments

We all want our investments to deliver high returns with little risk of losing our capital. Sadly, this isn’t possible. All investments carry some level of risk and the higher the potential returns the greater this is. Claiming unrealistic returns or that your money will be ‘safe’ is a sure-fire way to spot a scam. Ask yourself why more people aren’t investing in these opportunities if they can guarantee high returns.

6. Unusual investments

Investing can be complex and if you’ve not taken control of investment decisions in the past, you may be unaware of how your pension has been invested. However, unusual or complex investments can be used to dupe pension holders. This may include overseas property or forestry firms. Before making investment decisions, it’s important you understand where your money will be going. Doing some research can help protect your savings.

7. Brush off your questions and concerns

Criminals will attempt to minimise or dismiss any concerns you might have about proceeding. If someone is failing to give you answers to questions, take a step back. A genuine pension adviser will understand that retirement decisions are important. They’ll want you to feel confident in the decisions you’re making and be happy to answer questions you have. They’ll also allow you to take a step back and think about further questions you may have before proceeding. In contrast, a scammer will aim to get you to make a quick decision without the space to think it through properly.

If you’re worried that pension scammers have targeted you, the first thing to do is contact your pension provider. They may be able to block withdrawals if they haven’t already been completed. You should also report the scam to the FCA through the Scam Smart website, as well as alerting Action Fraud.

When we think about the value of financial advice, it can be hard to quantify it. After all, you often can’t be sure how your fortunes would have fared, or if your circumstances would be different if you hadn’t worked with a financial adviser. But research has shown that it does have real, tangible benefits for clients, as well as being valuable in other areas too.

Despite evidence demonstrating that financial advice can be valuable, nearly half (48%) of adults in the UK have never taken advice. Whilst the cost of advice may be a factor for some, this isn’t always the key factor. A third believe that they can manage their finances perfectly well themselves, with this rising to 57% of over-65s.

The financial benefits of advice

Research completed by the International Longevity Centre highlights how financial advice can help your wealth grow:

  • Those that received professional financial advice between 2001 and 2006, on average, saw their pensions and financial assets grow by £47,706 in 2014/16
  • Pension savers classed as ‘just getting by’ saw a 24% boost to their pension fund, compared to 11% of those considered affluent
  • Focussing on financial assets, the benefit of financial advice was £16,715 in 2014/16 compared to £13,888 in 2012/14, with a greater impact for ‘affluent’ groups

Whilst the cost of financial advice may be a prohibiting factor for some, the results show that the benefits can outweigh the initial and ongoing costs.

Whether you choose to receive ongoing advice, with regular reviews, or advice at key moments in your life, both can be useful. For example, you may choose to review your finances with a professional when you start a family or as you approach retirement. However, the research found that individuals who saw a financial adviser several times throughout the research period had nearly 50% more pension wealth on average than those that seek advice only once.

Financial advice can help you make the most of your wealth and put you on the right path for achieving aspirations.

The non-financial benefits of advice

The research clearly highlights why financial advice can be useful in terms of growing your assets and pensions. But it’s far harder to measure the non-financial benefits. Often, these are intangible, but they can be just as important as the increased value of assets.

Among these benefits are:

  • Time-saving: Ensuring you’re getting the most out of your money can be time-consuming. You may not have the time or inclination to keep track of your investment performance, forecast your pension income or find the best place to put cash savings. Working with a financial planner can take these responsibilities out of your hands. Your time is valuable and by handing over some of the financial decisions and research to an adviser, you’re able to focus on what’s most important to you, whether that’s your career, family or something else.
  • Confidence: Financial decisions can have long-term impacts. As a result, it’s not surprising that some people can feel apprehensive about their decisions or worry that they’ve made the wrong choice. Having someone to talk through your decisions and the different options can provide peace of mind. Knowing that a professional has looked at the pros and cons can give you confidence, knowing you’ve picked a path that’s right for you and your goals.
  • Security: Often when we make financial plans ourselves, we forget to look at what will happen if something doesn’t go to plan. Would you still be on track if your income were to stop for six months? Could you still leave an inheritance if care were needed? As part of the financial planning process, we’ll help you consider what kind of safety net can provide you with security. For some, this may be holding a greater portion of liquid assets, for others, it could include taking out some form of financial protection.
  • Keeping up to date with changes: Legislation and regulation are constantly changing. If this isn’t part of your job, it can feel impossible to keep up with these and know how to incorporate them into your financial plan. Working with a financial planner can take this weight off your shoulders. As part of your annual review, we’ll explain how change has had an impact on your initial plan. You’ll also be able to access advice if you have concerns following changes too.

If you’d like to review your financial plan or learn more about how advice can benefit you, please get in touch. Our goal is to create bespoke financial solutions that reflect your aspirations.

When it changes, the Bank of England base rate is something that’s featured heavily in the news. But why is it important and when does it matter to you?

The base rate is the interest rate that the Bank of England sets, in turn, it affects the interest rates that banks, building societies and other financial services offer. The base rate changes depending on economic conditions and influences the way consumers behave:

  • Low interest rates mean that borrowing is more affordable, encouraging consumers to spend more. When interest rates are low we’re more likely to consider buying a car using finance or take out a larger mortgage
  • In contrast, high interest rates mean you’ll earn more on savings and pay more when borrowing. As a result, it encourages people to save rather than spend

The Bank of England’s monetary policy committee sets the base rate, with members voting to leave base rates as they are or change them.

How has the base rate changed over time?

In recent times, we’ve become used to low-interest rates but this hasn’t always been the case.

The current Bank of England base rate is 0.75%. It’s been low for over a decade, following the 2008 financial crisis. In April 2008 the base rate was 5%. However, this was slashed several times over the course of a year in an effort to improve the economy and encourage consumers to spend and support businesses. In August 2016, it was cut even further, to 0.25%, taking it to a historic low. Over the last two years, it has increased but at a very slow pace.

Whilst we’ve experienced low interest rates for over a decade, this isn’t the historic norm.

During the late 80s, the base rate was far higher. In fact, the interest rate reached 15% in 1989. There are many factors that led to this decision but one of the key reasons was that it was seen as a way to reduce inflation.

The current interest rate and that of the late 80s are extremes. Looking at the historical average, interest rates have usually fallen between 4% and 6%.

But how will the Bank of England base rate change in the future? It’s impossible to say with certainty, but economic turbulence caused by ongoing Brexit uncertainty could mean that interest rates will fall even further; good news for borrowers but bad news for savers.

At the last monetary policy committee meeting in November, the base rate was held. However, it was the first time since June 2018 that this wasn’t a unanimous decision. It could signal that the base rate will be cut further if the UK leaves the EU in bid to support the economy.

The impact on your finances

The base rate set by the Bank of England affects the interest rate commercial banks will lend money. It’s used as a benchmark when lending to businesses and individuals.


You’ve no doubt noticed that savings have been benefitting from poorer interest rates over the last decade. If, since the financial crisis, you’ve been a saver rather than a borrower, you’re probably worse off.

For much of the last decade cash savings are likely to have grown by only small amounts. In fact, once you factor in inflation, your savings have probably declined in real terms. This means the spending power of your savings has been reduced.

In the past, cash savings may have offered you a way to grow your wealth safely over the long term. But lower interest rates may now mean it’s more appropriate to invest in order to outpace inflation.


In contrast, borrowers have benefitted from the low interest environment. It’s cheaper than ever before to borrow money. The interest rates for credit cards, loans and other forms of borrowing are competitive.

One of the areas you may have noticed this in is your mortgage. Our mortgage is often the largest loan we’ll ever take out and interest payments can be significant. If you had a tracker mortgage, which tracks the Bank of England base rate, at the time of the financial crisis, you’ll have noticed minimum payments fell.

Lower interest rates make borrowing more affordable. They also present the opportunity to overpay and reduce debt quicker, whilst paying less interest.

The Bank of England base rate may affect the best way to use your money. At some points, it’s wise to quickly pay off debt but in others, it can be more prudent to save or invest your capital. If you’d like to discuss how to get the most out of your wealth in the current low interest environment, please contact us.

More than half of adults plan on working in retirement in some way. Extending a career or transitioning into retirement is becoming more common but thousands of people intend to work into their eighties for a variety of reasons. Could you continue with your current job in later life?

If you’re planning to work past traditional retirement age, it’s important to consider the financial implications as well as if it is possible.

A survey from Fidelity International found 52% of adults think they’ll carry on working after traditional retirement age. As the State Pension age is expected to reach late 60s, it’s not surprising that 45% think they’ll still be working past the age of 70. However, almost 10% think they’ll still be earning an income into their 80s.

The default retirement age, which enabled employers to force staff to retire at the age of 65, was scrapped in 2011. Companies can now only insist on a cut-off age if they’re able to justify it. For example, if a job has a high level of physical activity that would be difficult as employees age. As a result, individuals now have greater control over when they retire.

The research indicates that it’s not just finances that are driving people to work longer than traditionally expected either. Those with higher incomes (more than £50,000) were more likely to want to continue working.

Maike Currie, Director for Workplace Investing at Fidelity International, said: “Today’s so-called retirees are healthier, living longer and retiring at different ages. So, it is unsurprising that people have no desire to retire and are defying traditional expectations.

“Retirement is no longer the cliff edge it used to be – the important thing, however, is to have a choice. Whether that be to work, to retire completely, or somewhere in between, it’s important for people to hit retirement age free from money worries, and with the ability to continue the lifestyle they have become accustomed to.”

What are your options when working past retirement?

If you’re hoping to work in retirement, it’s important to assess what your career options are.

First, of course, you could stay in your current position. If you’re happy in your role and feel as though you can continue to meet responsibilities, it can be the perfect option. However, you may find that some adaption needs to be made. This may be because of your ability to do the job in the future, for example, if it’s physically demanding, or because you want to adjust your work-life balance.

Adjustments could include flexible working hours, the opportunity to work from home or handing some of your responsibilities over to colleagues. Think about the type of retirement transition you want before approaching your employer. Being able to carry out your role is important, but so is striking the right work-life balance for you. Employers are becoming increasingly flexible and may be more accommodating than you initially think.

But sticking with your current career isn’t the only option. If you still want to earn an income in retirement, there are other options worth exploring, including:

  • Try a career switch. From learning new skills to taking a job with fewer demands, there are plenty of reasons why a change might be just what you’re looking for. Switching careers later in life can be daunting but weighing up the pros and cons can help you clarify if it’s the right option for you.
  • Go freelance or act as a consultant. It’s never been easier to work as a freelancer or consultant thanks to the internet and technology. The skills and knowledge built up over a lifetime could prove valuable for others willing to pay for your time.
  • Starting your own business. Far from wanting to slow down, research suggests that many retirees are keen to test their entrepreneurial skills. According to Aviva research, one in ten people would like to start their own business when retired. Whether it’s turning a hobby into a money-spinner or turning an idea you’ve had for a while into a reality, there are plenty of options.

The financial implications of working in retirement

If you plan to work beyond State Pension age, you should take some time to consider your finances. Whilst earning an income likely means you have more disposable cash, it can cause other consequences too. For example, if you’re accessing your pension, you may find that you’re pushed into a higher income tax bracket due to the additional income. Or future pension contributions may be affected by the Money Purchase Annual Allowance (MPAA), affecting how much you can save tax efficiently.

To discuss how your decision to work in retirement could affect your finances, please get in touch.

Please note: 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 regulations which are subject to change in the future.

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