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5 practical ways you could keep your child’s retirement on track

Longer lives and financial pressure mean many people believe that retiring in their 60s will become a thing of the past. So, if you want to ensure your child or grandchild can enjoy financial security later in life, how could you help them? Read on to find out.

Two-thirds of Brits believe retiring in your 60s will become a trend of the past

Most people planning for their retirement today, probably imagine themselves stepping away from work in their 60s. Indeed, according to the Office for National Statistics (ONS), in 2021 the average age of retirement for both men and women was 66.

Yet, that milestone could be decades later for younger generations.

A survey carried out by Canada Life found that 69% believe that retiring in your 60s will become a thing of the past. One of the biggest reasons for this is the expectation that we’ll live longer than previous generations. In fact, the median ideal age was found to be 90.

ONS figures highlight how growing life expectancy will affect the population of the UK. Between 2023 and 2050 the number of people aged 65 and above is expected to grow by just under 40%. Similarly, there is expected to be a 200% rise in the number of people who celebrate their 100th birthday during the same period.

Longer lives can present challenges, including the need to fund more years in retirement. So, it’s not surprising that two-thirds of people believe working for longer is the solution. Yet, that may not align with the goals or lifestyle aspirations of younger people.

If you’re worried about how your children or grandchildren are preparing for their retirement, even if it’s decades away, there may be some steps you can take.

How to help younger generations prepare for retirement

1. Encourage them to engage with their pension early

Retirement can seem like a milestone that’s too far away to concern yourself with when you’re starting your career. However, engaging with their pension early could mean loved ones have far more saved for retirement.

Pension contributions are typically invested so they have an opportunity to grow. As the money cannot be withdrawn, the returns are usually invested and may generate additional returns. This compounding effect means that small contributions at the start of a career could grow significantly.

Assuming an annual investment return rate of 5% before fees are considered and a retirement age of 65, the below table highlights how compounding could affect the retirement savings of two workers.

Source: Legal & General

As you can see, person B contributes more than £8,000 extra to their pension, but as they’ve missed out on 18 years of compounding, the value of their pension is almost £60,000 lower when they retire.

So, if your child or grandchild has paused their pension contributions or opted out of their workplace scheme, encouraging them to reconsider their decision could put them on track for a retirement that offers greater financial security.

2. Contribute to their pension on their behalf

If you’d like to lend a helping hand, you could make contributions to your loved one’s pension. Their pension would benefit from an immediate boost and the potential investment returns might mean your initial gifts grow over the long term.

You may want to speak to your family member about the contributions that are already going into their pension, including those made by their employer, to avoid exceeding the Annual Allowance, which could trigger a tax charge.

In the 2024/25 tax year, the Annual Allowance is £60,000 for most people and pension contributions of up to 100% of the pension holder’s annual salary can benefit from tax relief. If the pension holder is a high earner or has already flexibly accessed their pension, their Annual Allowance may be lower.

Unused Annual Allowance may be carried forward from the previous three tax years.

Remember, money that is contributed to a pension isn’t accessible until the pension holder is 55 (rising to 57 in 2028). As a result, you might want to assess your own financial security and the effect a gift could have on it before you contribute to a pension on behalf of a family member.

3. Lend financial support to help them reach other goals

Financial pressures might mean your loved one is considering halting pension contributions. So, speaking to them about other challenges they might be facing could highlight where your support may allow them the financial security to start saving for retirement.

For example, younger family members may be struggling to pay rent and save a deposit to get on the property ladder. A gift from you to help them reach the milestone of homeownership might mean they’re in a better position to start regularly contributing to a pension.

Alternatively, day-to-day financial pressures may mean your child or grandchild is hesitant to place money into a pension that they wouldn’t be able to access until they reached retirement age. In this case, regular financial support that could be used to cover everyday costs might give them the confidence to place money in a pension.

Again, assessing your financial plan and the implications of handing over regular gifts could help you understand the effect it might have on your wealth in both the short and long term.

4. Consider your legacy now

As part of your legacy, your wealth could be used to help children or grandchildren secure financial freedom in retirement. Reviewing your estate plan now could highlight ways you could support this goal, including through gifting assets during your lifetime or leaving wealth after you’ve passed away.

While creating an estate plan, it’s important to keep in mind that things may change. For instance, if you need to pay for care later in life, the inheritance you leave for loved ones could be less than you expect.

5. Refer them to your financial adviser

While loved ones are accumulating wealth, they might think they wouldn’t benefit from working with a financial planner. Yet, it’s never too soon to start thinking about retirement or other long-term goals. In fact, working with a professional before they step back from work could present an opportunity to grow their wealth further and create a more comfortable retirement.

So, if your children or grandchildren aren’t working with a financial planner, introducing them to yours could help get their finances on track.

Get in touch to discuss how you could support loved ones

If you’d like to talk about your options for lending financial support to loved ones, including helping them prepare for retirement, please get in touch. We could work with you to help you balance your financial security and retirement goals with the aid you might want to provide family members.

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

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

3 insightful reasons why setting goals may reduce financial bias

Subconscious bias can affect your financial decisions. They might mean you make decisions that aren’t right for you. Setting a goal could help reduce the effect bias has. Read on to discover three reasons why.

Cognitive bias is an error in cognition that can happen if your personal beliefs or experiences affect a decision you’re making. So, you might act based on an emotion rather than evidence. In some ways, cognitive bias is useful – it helps you make decisions quickly.

However, there are times when bias is potentially harmful, including when you’re making financial decisions.

Loss aversion is a common type of financial bias that might happen when you’re investing. Loss aversion is a tendency to avoid losses over achieving equivalent gains. The theory suggests that people feel more pain from losses than they feel pleasure from gains.

From an investment perspective, loss aversion could mean you’d prefer to hold your money in cash, even though it could be losing value in real terms once you consider inflation. Or that you choose low-risk investments even when taking greater risks would align with your goals and circumstances.

In these cases, loss aversion could mean missing out on an opportunity to grow your wealth because you’re worried about potential losses.

There are many other types of financial bias, and setting out your goals could help you manage them. Here are three insightful reasons why.

1. A goal could help you understand why certain decisions are right for you

A clearly defined goal can give you a sense of direction and an understanding of why you’re making certain financial decisions.

Having a long-term vision could mean you’re less likely to have a knee-jerk reaction due to emotions or events that are outside of your control. For example, if market volatility means the value of your investments falls, knowing that you’ve invested with a long-term view could help you stick to your plan, even if you’re nervous.

Setting out goals and understanding what’s realistic might remove some other forms of bias too.

Overconfidence bias involves overestimating your skill or knowledge when investing. It could mean you overlook relevant information or feedback because you believe you’re correct. In some cases, investors take more risk than is appropriate for them because they believe they’ll be able to secure higher returns by doing so.

A goal could temper some of the impulsiveness you might experience if you’re overconfident. If you’ve calculated you can secure your goals by achieving average annual investment returns of 4%, you might be less likely to chase potentially higher returns that could result in losses.

2. Setting goals could mean you recognise when emotions are affecting your decisions

Emotions are one of the reasons why people might make financial decisions that aren’t right for them. From feeling fearful during market volatility to being excited when a new opportunity comes along. Emotions might mean you don’t take the time to fully assess your options before acting.

Setting a goal can’t remove your emotions, but it might mean you’re more likely to realise when they could be clouding your judgment.

Let’s say you’re talking to a group of friends who are excitedly talking about an investment opportunity that they say will deliver high returns. It can be easy to be swept up in the conversation and invest without carrying out additional research to see if it’s right for you.

However, if you’ve set an investment goal and know what steps you need to take to reach it, you might be less likely to be side-tracked by emotional decisions.

3. A goal could help you form positive money habits

Working towards large goals often requires consistent and repetitive actions. You might regularly contribute to a savings account, pension, or Stocks and Shares ISA.

Taking consistent actions could help you form positive money habits that mean you’re less likely to stray from your financial plan when emotions or other influences occur.

Do you want help setting your financial goals?

If you’d like help setting financial goals and understanding the steps you could take to achieve them, please get in touch. Having an outside perspective looking at your finances could also highlight where financial bias might affect your decisions.

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

The value of your investments (and any income from them) 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.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Investment market update: September 2024

Economic data suggesting some developed countries, including the US, could fall into a recession continued to affect investment markets in September 2024. Read on to discover other factors that may have affected the performance of your investments.

UK

Data from the Office for National Statistics (ONS) shows inflation remained stable at 2.2% in the 12 months to August. The figure is slightly above the Bank of England’s (BoE) 2% target.

Despite speculation that inflation data would lead to the BoE cutting interest rates, the Bank opted to maintain its base rate at 5%. While good news for savers, it means borrowers, including mortgage holders, are still likely to face higher outgoings when compared to 2021.

Many economists expect the BoE will make an interest rate cut before the end of the year. Indeed, investment bank Goldman Sachs predicts the interest rate will fall to 3% over the next 12 months.

GDP data showed the UK economy returned to growth in July after a plateau in June. However, the figures were disappointing, with just 0.5% growth in the three months to July 2024.

There could be more positive news in the coming months though. Investment bank Peel Hunt optimistically said the UK economy is heading for “above-average growth” as inflation stabilises and consumer demand picks up.

A report from the Office for Budget Responsibility (OBR) provided a less cheerful outlook for the UK. The latest risk and sustainability report warned the UK, and other countries in the world, face long-term pressures, such as an ageing population, climate change, and rising geopolitical tensions.

In addition, the OBR said, based on current policy, public debt is projected to almost triple to more than 270% of GDP over the next 50 years. The comments highlight the challenging backdrop chancellor Rachel Reeves will need to consider as she prepares to deliver her first Budget on 30 October.

There was positive data released from the manufacturing sector. S&P Global’s Purchasing Managers’ Index (PMI) recorded the strongest month in two years. Both output and new orders continued to recover.

Yet, many businesses continue to face significant headwinds. Among those is UK shipbuilder Harland & Wolff, which owns the Belfast shipyard that once built the Titanic. The company entered administration in September.

Research also suggests that trade difficulties following Brexit could worsen. Aston Business School analysed the effect of the Trade and Cooperation Agreement on UK-EU trade relations, and found that trade is down by almost a quarter.

The FTSE 100 experienced ups and downs, including falling 0.6% to a three-week low on 4 September. Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Fresh worries about the health of the global economy have gripped markets, with the FTSE 100 far from immune.”

Europe

Eurozone inflation fell to 2.2% in the 12 months to August 2024. The news gave the European Central Bank the confidence to cut interest rates for the second time this year.

The Paris Olympics provided a short-term boost to the eurozone economy. A PMI output index increased for the first time since May in August 2024 to reach a three-month high of 51.0 – a reading above 50 indicates growth.

However, as the temporary boost of the Olympics fades, additional PMI data isn’t as positive. Indeed, HCOB’s flash PMI suggests the eurozone economy shrank for the first time in seven months in September.

The manufacturing sector in particular is struggling, with a PMI reading of 45.8 in August 2024. Dr Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said: “Things are going downhill, and fast. The manufacturing sector has been stuck in a rut.”

As the largest economy in the EU, the conditions in Germany can affect the bloc, and statistics suggest there are risks ahead.

Indeed, the Kiel Institute for the World Economy predicts Germany’s GDP will shrink by 0.1% this year and has halved its growth forecast for 2025 to 0.5%.

Statistics body Destatis reports industrial production in Germany fell by 2.4% in July – far more severe than the 0.3% fall economists had predicted. The automotive sector suffered the largest fall (8.1%) followed by electrical equipment (7%).

German carmaker Volkswagen has spoken about the challenges it faces. The company warned that it has a “year, maybe two” to adapt to lower demand. The economic environment has led to Volkswagen considering making unprecedented closures in its home market for the first time in its history as it tries to cut costs.

US

Inflation in the US fell to its lowest level since February 2021 in August 2024 to 2.5%. In response, the Federal Reserve cut its base interest rate from 5% to 4.75%.

The inflation and interest rate announcements led to the S&P 500 – an index of the 500 largest public companies in the US – jumping 1.5% on 19 September.

Similar to Europe, data indicates the manufacturing sector in the US is struggling. Indeed, the Institute of Supply Management reported it contracted for the fifth consecutive month in August. The news led to a dip in the markets around the world at the start of the month.

Figures from the Bureau of Economic Analysis also indicate a business threat as the trade deficit increased by $5.6 billion (£4.19 billion) in July to $103.1 billion (£77.13 billion).

American company OpenAI, the firm behind ChatGPT, announced it was in talks to raise $6.5 billion (£4.86 billion) from investors at a valuation of $150 billion (£112.21 billion) – making it one of the most valuable start-ups in the world.

Asia

Investment market volatility in Asia highlighted how factors around the world can affect markets. On 4 September, Japan’s Nikkei lost 4.2% and South Korea’s Kospi fell 3.4% after investors were spooked by fears that the US could experience a downturn when poor manufacturing data was posted.

A survey of China’s manufacturers from Caixin suggests export orders were subdued in August and fell for the first time this year as it faced external challenges.

However, China announced stimulus measures aimed at boosting the economy and stock market, as well as supporting the property sector on 24 September.

The news led to stock markets across Asia-Pacific rising – China’s CSI 300 index was up more than 4%. In fact, the announcement led to world stocks hitting a record high when the MSCI World Stocks index increased by 0.3%.

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

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Why inflation solutions should remain part of your long-term financial plan

High inflation has been a hot topic over the last couple of years, and as its pace stabilises, you might think it no longer needs to be part of your financial plan. Yet, skipping inflation when calculating your long-term finances could leave you with a shortfall.

The government sets the Bank of England (BoE) a target of keeping inflation at 2%.

The BoE explains that inflation that is too high or moves around a lot makes it hard for businesses to set the right prices and for people to plan their spending. However, inflation that is too low, or even negative, may put people off spending because they expect prices to fall. This hesitation to spend could lead to companies failing and people losing their jobs.

As a result, stable inflation is important for the economy.

A combination of the Covid-19 pandemic and the war in Ukraine, as well as other factors, led to the UK and many other countries experiencing a period of high inflation. Indeed, according to the Office for National Statistics (ONS), inflation reached a peak of 11.1% in October 2022 – the highest rate recorded in more than 40 years.

The good news is that the rate of inflation has since fallen and started to stabilise. In the 12 months to August 2024, the ONS reported inflation was slightly above the BoE’s target at 2.2%.

While the immediate pressure of prices rising sharply has eased, that doesn’t mean you can forget about inflation when you’re reviewing your long-term finances.

Even when inflation is stable, prices are often rising

While inflation meeting the BoE’s target won’t often make headlines, it still means that the cost of goods and services is rising. You might think 2% inflation won’t affect your finances too much. Yet, when you look at the long-term impact, the effect could be harmful if it’s something you’ve overlooked.

According to the BoE, inflation averaged 2% a year between 2010 and 2020. So, if you had £20,000 in 2010, you’d need almost £24,320 in 2020 just to maintain the spending power you had a decade ago.

That could have a substantial effect on some parts of your financial plan. For instance, if you’ve set a retirement income without considering how it may need to grow to support your lifestyle, you could find you face a shortfall. During a retirement that could span decades, the effects of even 2% inflation might really add up.

Inflation has only hit the target rate 30% of the time since 1997

What’s more, while the BoE has an inflation target, there are factors outside of its control that may cause it to rise or fall, as the last few years have demonstrated.

Indeed, according to a report in FTAdviser, since 1997, the BoE has missed its target around 70% of the time, and it’s more likely to be above the target than below it.

As a result, even if you’ve factored a 2% rise in inflation into your long-term plan, you could still experience outgoings rising at a quicker pace than your income. Considering the effects of a high inflation environment may help you secure your finances and keep goals on track even when factors outside of your control lead to expenses increasing.

Making inflation part of your financial plan

It’s impossible to know what the rate of inflation will be next year, and when you’re creating a long-term financial plan, you might want to weigh up the effect of inflation over decades. While you can’t predict what will happen, there are often steps you can take to incorporate it into your finances and provide security.

As part of your financial plan, you might consider how to:

Create a financial buffer in case inflation is higher than you expect
Use other assets to support your income during periods of high inflation
Grow your wealth at a pace that could match or beat the rate of inflation
Regularly review your short- and long-term finances to ensure they continue to reflect your current circumstances.

An effective financial plan could help you prepare for the unknown, including the inflation rate.

Contact us to discuss how to incorporate inflation into your financial plan

If you’d like to review your financial plan and understand how inflation might affect your outgoings, we could help. Please contact us to arrange a meeting with our team.

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

3 useful steps that could prevent your business falling victim to a scam

It’s not just your personal finances that may be attractive to fraudsters. As a business owner, you might also want to consider the steps you could take to halt a potential scam that targets your firm. Indeed, research suggests it’s something overlooked by many small business owners.

According to UK Finance’s Annual Fraud Report 2024, almost £1.2 billion was lost to personal and business scams across more than 2.9 million cases in 2023.

The most common type of scams to affect businesses in 2023 were invoice and mandate scams. This is where a scammer may intervene when you’re trying to pay a legitimate invoice to redirect the money to their account. They may pose as legitimate suppliers and claim their bank account details have changed.

Non-personal losses through invoice and mandate scams totalled £35 million in 2023.

Fraudsters might also use a CEO scam to target businesses. In this deception, the scammer would pose as the CEO of the business or another high-ranking team member to convince a member of your staff to make an urgent payment to their account. In some cases, the criminal may even use spoofing technology so it appears messages have come from a genuine email address or phone number.

In 2023, more than 380 businesses fell victim to a CEO scam.

Scams you might more commonly associate with individuals could affect your business too. For instance, in 2023, there were more than 3,600 non-personal purchase scams reported. Businesses were also affected by investment scams, police impersonation, push payments, and even romance scams.

Almost 7 in 10 small businesses use weak passwords to access critical documents

Fraud could leave businesses in a financially vulnerable position. Yet, a survey suggests that many small businesses aren’t taking simple steps to mitigate the risks.

According to a survey reported by HR Review, almost 7 in 10 small businesses could be exposed to fraud because they’re using weak passwords to access critical documents and internal platforms, which could leave them open to cyber threats. In addition, nearly half (47%) did not have up-to-date antivirus software that would detect a hack.

It’s not just your online security that could affect the likelihood of your business being affected by a scam. In many cases, your employees, particularly those with financial responsibilities, could be exploited too.

3 ways to help your employees prevent scams

1. Make scam awareness part of your employee training

Your employees might not be aware of the common scams that could affect businesses and miss the warning signs as a result. Indeed, the HR Review survey found that 48% of businesses fail to provide any cyber security awareness training to employees.

Some members of staff might benefit from further training too. For example, you might want to cover how to check if an invoice is legitimate or what to do if a payment seems suspicious to employees who work in your finance department.

2. Make scams part of conversations at your business

Mentioning the risk scams pose once during training and then never talking about it again could mean employees forget the warning signs or that your team aren’t aware of the latest tactics fraudsters are using. So, next time you read about a scam or hear of another business being affected, a conversation about it could be valuable.

Making scams a topic of conversation could also help employees feel more comfortable raising a potential concern.

3. Keep on top of your finances

Whether you go through the accounts yourself or a trusted employee handles this task, scheduling regular reviews could be helpful. It might mean you spot irregularities far sooner and can minimise the damage a scam does to your business.

We could help you identify a scam

If you fall victim to a scam, it’s often important to act as quickly as possible. If you’ve provided account details or sent money, contacting your bank could potentially prevent losses. You can also use Action Fraud to report a crime.

If you’ve received an email and you’re not sure if it’s a scam, whether it’s related to your personal finances or those of your business, we could help. We may identify the warning signs or red flags you’ve overlooked.

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

Climbing annuity rates could boost your retirement income

Purchasing an annuity could provide you with a regular income throughout retirement. And rising annuity rates could help your pension savings go further.

An annuity is something you buy, often with the money saved in your pension, which then provides a guaranteed income. The annuity rate offered affects the income you’d receive and it can vary between providers.

If you’re nearing retirement, the good news is that annuity rates have increased. According to the Standard Life Annuity Rate Tracker, the average annuity rate for a healthy 65-year-old was more than 7% in June 2024.

Let’s say you have £100,000 to purchase an annuity. If you were offered a rate of 5%, you’d receive an annual income of £5,000. With an annuity rate of 7%, you’d receive £7,000. So, rising annuity rates could help you get more out of your pension savings.

The above figures provide an example of how an annuity could support your retirement, but several factors will affect the income you could receive. Rates can also vary between providers, so it may be worthwhile shopping around before you purchase an annuity.

Choosing an annuity could provide you with financial security

One of the key benefits of choosing an annuity is that you’ll receive a regular income that you know you can rely on. For some people, this security could provide peace of mind when they retire. As your money will no longer be invested, you will also be protected from market volatility.

If knowing how much income you’ll receive each month in retirement would make you feel more comfortable, an annuity could be right for you.

However, there are drawbacks to consider too.

Compared to other options, an annuity is less flexible. For example, you cannot take a higher income from an annuity to cover a period of increased outgoings. So, considering how your income needs may change in retirement could be useful.

In addition, your savings could remain invested with alternative options. While this means your money would be exposed to investment risk, it also provides an opportunity for your retirement savings to grow further.

It’s important to weigh up the pros and cons of annuities before you purchase one, as it may not be possible to change your mind afterwards. We could help you assess how to turn your pension into a retirement income in a way that aligns with your goals and needs.

4 valuable questions to answer if you’re purchasing an annuity

1. Would you benefit from a joint annuity?

If you’re retirement planning with your partner, you might find that a joint annuity is valuable. A joint annuity would continue to provide an income for your partner if you pass away first. It could provide both you and your partner with peace of mind and ensure their financial security.

You’ll usually be able to decide how much of the income they’d receive, such as 60% of the full annuity. So, it might be worthwhile calculating how much they’d need to cover essential expenses and to maintain their lifestyle.

2. Do you want your income to rise in line with inflation?

Some annuities will pay out a static income for the rest of your life. This may be suitable for some people, but it’s often wise to consider the effect of inflation.

Inflation means the cost of goods and services rises. So, if your income doesn’t increase too, it’d gradually buy less. Let’s say you purchased an annuity in 2003 that provides an annual income of £30,000. According to the Bank of England, two decades later, you’d need an income of more than £52,500 simply to maintain your spending power.

So, choosing an annuity that will provide an income that increases each year could be valuable.

3. Do you qualify for an enhanced annuity?

Research suggests some retirees could be missing out on a potentially higher income by not taking out an enhanced annuity.

An enhanced annuity might offer you a higher income because of your medical history or current state of health. It may cover a wide variety of health issues, such as diabetes, high blood pressure, or chronic asthma. Some lifestyles that could reduce your life expectancy, such as smoking, might also mean you’re eligible for an enhanced annuity.

Yet, according to a report in IFA Magazine, 84% of retired annuity holders who would likely qualify for an enhanced annuity do not have one.

4. What proportion of your pension do you want to use to buy an annuity?

Finally, you may want to consider how much of your pension you wish to use to purchase an annuity.

When accessing your pension, you can choose to mix and match your options to create an income that suits your needs. So, you might decide to use half of your pension to secure a regular, reliable income through an annuity. You may then flexibly access the remainder when you need to.

Get in touch if you’d like to discuss your pension and annuities

If you have questions about annuities or would like to arrange a meeting to talk about your retirement plan, please get in touch.

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

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

3 insightful pieces of data that could help you remain calm during market volatility

When you read that investment markets have fallen you might feel nervous or scared about the effect it could have on your future. Emotions like these sometimes lead to impulsive decisions that aren’t always in your best interest when you consider the long term. So, read on to discover some insightful pieces of data that could help you remain calm.

Volatility is part of investing – a huge range of factors might influence whether a stock market rises or falls. However, history shows that, over the long term, markets typically go on to deliver returns.

Recently, markets experienced volatility amid fears that the US was on track for a recession. Indeed, on 2 August 2024, US technology-focused index Nasdaq fell 10% from its peak. Just a few days later, the market rallied, and it was technology firms that led the way.

Concerns about the US economy weren’t confined to the US indices either. Markets fell in Europe and Asia too. In fact, Japan’s Nikkei index suffered its worst day since 1987 following the news. Again, it didn’t take long for the markets to bounce back.

Returns cannot be guaranteed and recoveries may be over longer periods. Yet, the above example highlights how making a knee-jerk decision due to volatility could harm your long-term wealth. If you’d responded by selling your investments when you saw markets were falling, you’d have missed out on the recovery.

So, if volatility is part of your experience when investing, how can you remain calm? These pieces of data could help you hold your nerve.

1. Investment risk falls over a longer time frame

It’s important to note that all investments carry some risk. There is a chance that you could receive less than the original amount you invested. However, the level of risk varies between investments, so you could invest in a way that reflects your risk profile and financial circumstances.

Usually, it’s a good idea to invest with a five-year minimum time frame. By investing for longer, you’re giving your investments a chance to recover if they fall due to short-term volatility.

Research supports this too. Using almost 100 years of data on the US stock market, Schroders found that if you invested for a month, you would have lost 40% of the time. Interestingly, when you invest for longer, your odds of losing money start to fall.

When invested for five years, the odds of losing money fall to 22%, and at 10 years it falls to 13%. The research shows there have been no 20-year periods during the time analysed where stocks lost money overall.

You can’t rule out risk entirely, but by investing for a long-term goal, you could minimise the chance of losing money.

2. Sharp drops in the market occur more often than you think

One of the reasons investors react to market movements is that sharp falls may feel like they’re unprecedented and that you should act as a result. Yet, the Schroders research suggests that sharp falls are more common than you might think.

Analysing the MSCI World Index, which captures large and mid-cap representations across 23 developed countries, the study found that 10% falls happen in more years than they don’t. Indeed, in the 52 calendar years to 2024, investors experienced a 10% fall in 30 of them.

Even significant falls of 20% may occur more than you expect – roughly every six years.

Despite these dips, markets have delivered returns over the 50 years analysed. So, holding your nerve during these sharp falls often makes sense when you take a long-term view.

3. Periods of “heightened fear” could be more lucrative

The Vix Index measures expected volatility in the US market– it’s often referred to as the market’s “fear gauge”. It can highlight when investors perceive there is a greater risk of losing money. For example, it last reached a significant peak in May 2022 in the aftermath of the invasion of Ukraine.

Schroders has assessed how your investments would fare if you sold assets during periods of “heightened fear” to hold your wealth in cash, and then shifted back to investments when the fear receded. Taking this approach when invested in the S&P 500 – an index of the 500 largest public companies in the US – would have yielded average returns of 7.4% a year between 1990 and 2024.

However, if you didn’t let fear affect your investment decisions and remained invested, you may have benefited from average annual returns of 9.9%.

So, even when it seems like investing isn’t a good idea because of the economic environment or geopolitical tensions, it could be worthwhile taking a step back to consider what’s driving your decision.

Contact us to talk about your investments

If you have questions about investing and how it could support your financial goals, please get in touch.

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

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

5 practical questions to consider when you’re naming a Lasting Power of Attorney

Who you choose to act on your behalf if you lose mental capacity is an important decision. You want to select someone you trust and you feel confident could act in your best interest should you need them to. So, read on to discover five practical questions you might want to answer when you’re setting up a Lasting Power of Attorney (LPA).

An LPA gives someone you trust the ability to make decisions on your behalf if you’re no longer able to. For example, they could take on this role if you’ve been involved in an accident or suffer from an illness that means you don’t have the mental capacity to handle your affairs.

There are two types of LPA:

Health and welfare LPA, which would cover decisions like your medical care, whether to continue life-sustaining treatment, moving into a care home, and your daily routine
Property and financial affairs LPA, which would cover decisions like paying your bills, managing your bank account or other assets, and selling your home.

You should consider naming both types of LPA. They could provide you with security and ensure someone is acting on your behalf if you’re in a vulnerable position.

According to FTAdviser, the number of LPAs registered in 2023 jumped by 37% when compared to a year earlier and marked the first time registrations exceeded a million.

Yet, a separate study from Just Group also suggests that millions of families could be unable to act on behalf of their loved ones if something happened to them. Indeed, it’s estimated that 59% of over-75s haven’t arranged an LPA – the equivalent of 3.4 million people.

If you don’t have an LPA set up, someone wishing to act on your behalf may need to apply to the Court of Protection to be appointed as your “deputy”. This could mean someone you wouldn’t choose is given the responsibility of handling your affairs.

In addition, going through the Court of Protection can be a costly and lengthy process. It might place unnecessary stress on your loved ones at an already difficult time and could mean your affairs are left unattended for months. For instance, it may mean that you don’t have the support you need at home, such as care services, or that bills go unpaid.

What to consider when choosing your Lasting Power of Attorney

Your LPA must be someone who is aged 18 or older. Often, people choose family members as their LPA, but you might also select a trusted friend or even a professional, such as a solicitor, to act on your behalf.

These five practical questions could help you decide who to name as your LPA.

1. How many Lasting Powers of Attorney will you name?

You can select just one LPA, but you can also choose several people to act on your behalf. Multiple LPAs can be useful and help relieve some of the pressure they might feel if they need to make decisions for you. For example, if you have two children, you might choose to name them both so they can share the responsibility.

Even if you choose a single LPA, you may also want to name a replacement in case your first choice cannot fulfil their role.

2. Who do you trust to act on your behalf?

One of the first questions you’ll often want to consider is who you trust to make decisions on your behalf. An attorney will potentially have a lot of power over your life and financial affairs. So, it’s important you feel comfortable giving them this responsibility and are confident they’ll act in your best interests.

If you have multiple LPAs, it might be important to consider how well they’ll work together. Conflicts arising could harm your wellbeing and mean decisions are delayed.

3. Who has the right skills to act as a Lasting Power of Attorney?

Next, you may want to think about whether the people you’d choose as an LPA have the right skills for the role. You might want to consider how they handle their affairs – are they generally organised and make decisions that you agree with?

4. Would your Lasting Power of Attorney be comfortable making large decisions on your behalf?

Becoming an LPA can be a lot of responsibility, which some people might not be comfortable with.

Having a conversation with the person or people you’d prefer to act on your behalf can be valuable. It could provide an opportunity to talk about what your wishes would be, such as your views on life-sustaining treatment, and ensure they’d be confident making potentially difficult decisions for you.

5. Will your attorneys be able to make decisions independently?

Finally, if you’ll be naming more than one LPA, you’ll need to decide if they can make decisions independently or must act together.

Your LPA will state whether they must make decisions “jointly”, meaning all attorneys must agree, or “jointly and severally”, which means they could act independently. Being able to act severally might be useful if decisions need to be made urgently, such as those relating to medical treatment.

You can specify which decisions you’d like them to make together. For example, you might state they can handle tasks like managing your bills severally, but when it comes to selling property, they must make it jointly.

Contact us to make a Lasting Power of Attorney part of your estate plan

Naming an LPA can form part of your wider estate plan that considers how to manage your wealth later in life and when you pass away. If you’d like help creating an estate plan, please contact us.

As your financial planner, we may also understand your goals and what you’d like your LPA to consider when making financial decisions for you. We could offer support and guidance if they need to act on your behalf.

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

The Financial Conduct Authority does not regulate estate planning or Lasting Powers of Attorney

Regular financial reviews may help you get more out of every stage of life

Balancing your long-term goals with enjoying your life now can be a difficult balancing act. Regular financial reviews could ensure you get more out of your life at every stage by helping you to strike a balance that suits your needs.

It’s a common misconception that financial planning is simply about accumulating wealth. While managing your assets is a key part of effective financial planning, it’s about more than that. A financial plan could give you the confidence to enjoy life now while securing your future.

A financial plan could be valuable and help you reach your goals, but to get the most out of it, ongoing reviews may be just as important.

Your goals and priorities may change over time

What were your goals and priorities 20 years ago? While some may have remained constant throughout your life, others could have changed significantly.

Perhaps in your 30s, you were focused on progressing in your career and building wealth. However, once you start a family, your priorities may shift to improving your work-life balance so you can spend more time with your children.

Similarly, you might initially decide you want to retire when you’re 70, but later find you’d like to give up work sooner so you can travel or spend more time on hobbies you’re passionate about.

Your aspirations are an essential part of creating a financial plan. They will guide the decisions you make so they reflect what you want to get out of life.

So, regular reviews that provide an opportunity to talk about what’s important to you could help you enjoy life now and consider what you’d like to achieve in the future.

A review could ensure your financial plan continues to reflect your circumstances

It’s not just your goals that will change throughout your life. Your financial circumstances are likely to vary through different life stages too.

When you first create a financial plan, you might be building your career and as you progress, your salary could change significantly. Updating your plan could help you assess how to use your income to enjoy life – should you increase your disposable income now or put more away for retirement?

There isn’t a one-size-fits-all answer, so reviewing your financial plan could help you assess how to use your wealth in a way that continues to reflect your goals.

There are other reasons your financial circumstances may change too. Perhaps you receive an inheritance, start financially supporting elderly family members, or decide to reduce your working hours.

Cashflow modelling is a tool you can use as part of your financial plan to help you visualise your wealth. It could show you how your assets will change over time.

Cashflow modelling may be useful when you want to understand the effect your decisions will have. For example, you might model how increasing pension contributions could alter your retirement income, or how gifting assets to your children might affect your financial security later in life.

The results of a cashflow model are based on assumptions, such as expected investment returns or inflation, so they cannot be guaranteed. However, regularly updating the information you input into a cashflow model, from your income to the value of assets, could improve the outcomes.

Regular reviews could put your concerns about the future at ease

Worrying about the future is a common reason for being unable to enjoy the present or even look forward to long-term plans. Knowing that you’re being proactive in securing the future you want could ease some of these concerns.

A financial plan could address fears like whether you’re saving enough to retire. Reviews could also put your mind at ease about factors that are outside of your control.

For example, you might worry about what would happen if you need care later in life, which could affect life satisfaction today. According to a report in FTAdviser, 59% of people worry about developing Alzheimer’s because of the pressure it would place on their family, and 41% are concerned about the cost of care.

If this is something you’re worried about, your financial reviews could provide a time to talk about your concerns and adjust your plan to put your mind at ease. For instance, you might decide to put money aside to act as a care fund or name a Lasting Power of Attorney so someone you trust could handle your affairs on your behalf.

We’re here to help you create and review your financial plan

As your financial planner, we’re here to work with you to create and then regularly review your financial plan to help ensure it continues to support your short- and long-term goals. Please contact us if you’d like to arrange a meeting.

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

The Financial Conduct Authority does not regulate cashflow planning.

How “lifestyle financial planning” could help you reach your goals

Effectively managing your finances to get the most out of your assets often means going beyond paying into a pension regularly or selecting a fund to invest through. That’s why lifestyle financial planning could help you better align your finances with the life you want to lead now and in the future.

Financial advice alone might help you understand the benefits of investing money and which opportunities may suit your financial risk profile. While this is useful, it doesn’t consider how investing could support your lifestyle goals. Lifestyle financial planning could help you bridge the gap between your finances and aspirations.

Read on to find out more.

A lifestyle financial planning conversation starts with your goals

While you might expect a financial plan to start delving into the numbers straightaway, lifestyle financial planning is as much about your goals as your assets.

So, often conversations will start with what you aspire to in the short and long term. This approach means you can start to understand why you’ve set money goals. While you might have a target for your savings, what you want to do with the money is often what drives you to diligently add to the account every month.

For example, when building a nest egg, you might be:

Planning to use it to retire early
Improving your financial security by creating a safety net
Dreaming about a once-in-a-lifetime cruise you want to take
Putting money aside to help your children or grandchildren get on the property ladder.

Not only could your goals give your financial plan a direction, but it may provide useful motivation too.

Putting money aside for a retirement that is still a decade away might feel tedious, especially if there are experiences you’d like now. Yet, if you’re looking forward to a retirement that allows you to travel more or indulge in hobbies, you might be less likely to cut your contributions.

Having a clear idea about what you’re working towards may mean you find it easier to make sacrifices now. Yet, according to an Aegon report, just 1 in 4 people have a concrete version of the things and experiences their future self might want.

So, as part of creating a lifestyle financial plan, you might want to dedicate some time to thinking about what your goals are.

In addition to goals, you may also want to consider what you’re worried about. For example, when you consider your future, you might be concerned about how:

To pay for care costs if needed
Inflation might affect your retirement income
Your partner would cope financially if you passed away first
To pass on your wealth tax-efficiently during your lifetime or when you pass away.

Speaking about your worries as part of your financial plan might help you identify ways to put your mind at ease. For instance, if you’re worried about how the cost of care could affect your wealth and loved ones, you may decide to set money aside to cover a potential bill.

Your lifestyle goals are at the centre of your financial plan

Once your priorities are set out, it’s time to start thinking about the numbers – are your goals realistic and what steps might you need to take to reach them?

Starting with your goals means you can focus on how to use your wealth to live the life you want rather than simply looking at how to grow your assets.

Take retirement, for example. You might calculate that if you work until you’re 65, you can use your pension to create an income of £45,000 a year. But, if retiring early is what you really want, and you can retire at 55 with a lower, but still comfortable income, you might decide that building more pension wealth isn’t the right option for you.

Lifestyle financial planning could help put your wealth into perspective and allow you to see how it might be used to turn aspirations into reality.

Regular reviews could help ensure your lifestyle financial plan continues to align with your goals

During your lifetime, you’re likely to encounter obstacles, be presented with opportunities, or simply change your mind.

Your lifestyle financial plan isn’t static; it can evolve to suit your needs. Regular meetings are a vital part of ensuring your finances continue to reflect both your circumstances and aspirations.

For instance, seeing your grandchildren struggle to get on the property ladder might mean you’re keen to pass on wealth during your lifetime. If you’d previously planned to pass on wealth through an inheritance, you may benefit from reviewing how gifting now could affect your wealth now and in the long term.

Knowing that you have someone to discuss your changing wishes with could give you the confidence to pursue new goals.

In the above example, calculating if you’d still have a financially comfortable retirement after providing grandchildren with a property deposit could offer you peace of mind.

Contact us to create your lifestyle financial plan

If you want to create a financial plan that considers the lifestyle you want to achieve, please contact us. We’ll help you understand the steps you may be able to take to turn your dreams into a reality.

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

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.