Worried about retirement savings? More than half of over-50s don’t have retirement plan

With people living longer and costs rising under persistent inflationary pressures, a comfortable retirement may seem increasingly difficult to achieve. However, if you’re worried about your financial security, you’re not alone. Russell Brett explains why it’s never too late to shore up your pension pot.

Inflation may be down to ‘normal’ levels now but it’s no secret that the cost of retirement has sharply shot up. In the last year alone, the cost of retiring has surged by 20%. This is a clear concern for those approaching retirement age, especially with life expectancy rising. 

Living to 100 is now a ‘very real possibility’ for some of us - which puts considerably more strain on our pension pots. With this in mind, how can late savers ensure financial stability in the face of a volatile market?

Just 16% of people are confident they’ll have a comfortable retirement

The cost of affording comfortable retirement for a couple is now £54,000 per year, according to a new report by Nucleus Retirement. While this figure may cause most of us to reluctantly reach for the calculator to crunch those all-important numbers, it’s vital that investors don’t panic. 

Instead, let’s look at the wider picture here. For a basic retirement, a single person could live on £12,800 a year - and a couple for just under £20,000. For a moderately comfortable retirement, this increases to just £23,300 for a single retiree or £34,000 for a couple. This is a much more achievable baseline - and less onerous for many of us.

People with a financial adviser ‘more confident’ of a comfortable retirement

Those savers looking ahead to retirement shouldn’t focus too much on what is happening right now as markets invariably shift - but of course, a shrewd investor doesn’t need to be told this.

The requirements for a pension pot may have risen in recent years, but this has been a result of inflation reaching a 40-year-high in 2022. Since then, the UK has slowly begun to pull itself out of a recession, inflation is falling and prospects for workers and savers alike are on the up. Consumer Price Inflation is now down to just 2.3% - its lowest level in three years and a hair’s width from the Bank of England’s 2% goal.

It may come as no surprise that people with a dedicated financial adviser to guide them through saving and investment decisions, retirement planning and inheritance planning have reported that they are more confident of a comfortable retirement than their non-advised peers - which is great news for our valued clients.

It’s never too late to start saving for retirement

While it is better to start saving early for your retirement to allow longer for your funds to accrue and gain value throughout your career, there is no right and wrong answer. After all, your financial circumstances are unique to you.

Rising life expectancy could mean that some of us live for 20-40 years after hanging up our suit and tie for good, so this adds an important sense of perspective that it’s easy to lose sight of. 

Taking proactive steps now to assess your financial situation and draw up clear goals can shore up your finances and create a more stable future. Remember, this would set you apart from almost half of those over-50s, who lack any clear financial plans for retirement at all!

What are my next steps?

The most prudent next steps would be to speak directly to an expert financial adviser to discuss your finances now and your optimum financial prospects for your anticipated retirement

There are a wealth of ways you can increase your pension pot over the next few years, ranging from increasing your pension contributions to making informed investments to increase your capital, minimise your tax liabilities and safeguard your assets for your well-deserved retirement. There are a wide range of differing investment options available across a spectrum of risk - which you can explore more about here.

Get in touch with our team of specialist financial advisers today to explore the opportunities open to you to secure a comfortable retirement.

 


What could the upcoming General Election mean for you and your investments?

With confirmation from Downing Street that there will be a General Election in just a few short weeks, many investors will be wondering what impact this may have on financial markets. What could a potential change in government mean for your investments and returns? Russell Brett explains all.

The Prime Minister has announced that a General Election will be held on 4th July. In Rishi Sunak’s own words, “now is the moment for Britain to choose its future” - but what does that mean for you?

Will a General Election impact financial markets?

The short answer is ‘yes’. While the Conservatives promise “a clear plan and bold action”, the Labour Party counters that a change in government will spur growth, combat economic decline and put an end to uncertainty - but the process of preparing for an election itself typically causes economic uncertainty. As Keir Starmer himself states, an election is “an opportunity for change” - and fiscal markets are by no means immune.

However, regardless of which leader stands victorious at the lectern next month, how might the next six weeks of fervent campaigning and a potential change in leadership affect your long-term investments?

The three ‘big ticket’ election concerns

Whatever your political affiliation, rising costs of energy, food and essentials have impacted everyone over the past few years. After 14 consecutive increases in Consumer Price Inflation culminating in it reaching a 40-year high in 2022 and then the UK having tentatively entered into a recession, the outlook is finally looking up.

Inflation is now ‘normal’ at just 2.3% and very nearly within the Bank of England’s 2% goal - at its lowest level in almost three years. However, economic growth is slow. 

What legislative and fiscal changes could a change of government entail for this slow but promising economic upturn? Investors and savers alike are bound to be asking this very pertinent question. 

The three main concerns for UK voters, according to the academic and political expert Matthew Goodwin, are likely to come down to:

  1. Healthcare
  2. Inflation and the cost of living 
  3. Immigration.

Changes to Inheritance Tax, Capital Gains Tax and Income Tax look unlikely

If the Conservatives cling to power, it seems illogical to assume they would stray from their stances on the above items, meaning current legislation would likely remain intact. However, the disapproval rating for Rishi and his parliament is remarkably high, with satisfaction levels now as low as John Major’s in 1994. 70% of people want a change in government - but whether they get it remains to be seen.

This is all supposition, of course, but with a growing sense of ambivalence across the voting public, it seems increasingly likely that we will soon see a Labour government. If this happens, how might they upturn current taxation policies?

There’s very little leeway in further adjusting Income Tax - indeed, it is frozen at its current thresholds until 2028. If Labour becomes government, I would think it very unlikely they’d tinker with this. Similarly, I don’t see any real incentive for them to make any (negative) changes to Capital Gains Tax - which has already been slashed during the Conservative Government from a £12,300 annual tax-free allowance in 2021/22 to just £3,000 this year.. 

The issue of Inheritance Tax also looks very improbable to be contested, regardless of whichever party wins out - as removing or diminishing it goes against Labour’s principles, should they win, as the tax penalises those with more assets.

Would a Labour government reintroduce the pension Lifetime Allowance or LTA, whereby pension holders with pension assets above a certain level would be charged a further tax on withdrawals? We heard the current Shadow Chancellor instantly state that they would reinstate this Allowance once they were ‘in power’, but in reality, would they? And if they did, what caveats would there be for certain Public sector employees such as NHS doctors and how would they justify these caveats to the Private sector?    

One thing that certain voters may err in favour of the Conservatives for is Labour’s proposed abolition of the tax-free status of private schools - which would make fees subject to 20% VAT. However, with only 5.9% of UK children in private education, this is unlikely to swing the needle for the Conservatives on its own.

What can investors expect?

I don’t claim to be omniscient, but looking at the current figures, public sentiment and economic outlook under present legislation, investors should not be especially concerned about what is in their pocket or their portfolios at this time. 

Whether Rishi succeeds in keeping his premiership or Keir uproots him to bring the UK its first Labour government in 14 years, I am confident that either person as Prime Minister will look to further ease inflation, reduce the cost of living and bolster economic growth. Indeed, if things continue with the slow but fledgling promise currently shown, we could logically expect two, perhaps even three reductions in Interest Rates before the year's end.

However, while there is no need to panic, that doesn’t mean investors can become complacent. The best defence against changing conditions is speaking to your dedicated financial adviser.

Get in touch today to make shrewd investment decisions and balance risk throughout your portfolio now to potentially yield greater returns down the line. 


Leave a lasting legacy: How can I protect money for the next generation?

We all want to ensure our loved ones can enjoy the best life possible, and your legacy can help them live happily long after you’re gone. Russell Brett explains how you can protect your assets for the next generation.

Safeguarding your assets requires careful planning and strategic decision-making - not just for your own personal enjoyment of assets now, but also to preserve them for future generations. 

With more options than ever before, the sheer choice of legacy planning can be overwhelming, particularly if your goal is to leave your loved ones as much money as possible. Here's an at-a-glance guide on how UK investors can protect their hard-earned wealth for the benefit of their families down the line...

Draft a comprehensive Will

One of the most important steps in estate planning is to create a legally binding Will. A Will ensures that your assets are distributed according to your wishes after you die. Without this legal safeguard, the distribution of your estate may be subject to intestacy rules, which might not align with your preferences. 

If you already have a Will in place, ensure that it is regularly reviewed and updated to reflect any changes in your financial situation or family circumstances.

Make use of your Allowable Gifts

In the UK, certain gifts are exempt from inheritance tax (IHT) if made during your lifetime. These include annual exemptions, small gifts, wedding gifts, and gifts to charities. By taking advantage of these allowances, you can reduce the taxable value of your estate while also providing financial support to your loved ones.

Transferring assets, such as property, to your heirs during your lifetime can be an effective strategy for reducing inheritance tax liabilities. However, it's essential to consider the implications carefully, as gifts may be subject to potential capital gains tax and other levy considerations. Seeking professional advice can help ensure that your gifting strategy aligns with your overall estate planning goals while minimising your tax liabilities.

Employ the strategic use of trusts

Trusts are powerful tools for asset protection and estate planning. They allow you to transfer assets to trustees who manage them on behalf of your beneficiaries. Trusts can be tailored to your specific needs, whether you want to protect assets from creditors, provide for minors or individuals with special needs, or simply control the timing of distributions. Setting up a trust can help mitigate inheritance tax liabilities and ensure your assets are managed according to your exact wishes.

Carefully navigate inheritance tax liabilities

Inheritance tax is a significant consideration for UK investors looking to pass on their wealth. Currently, estates valued above the nil-rate band (£325,000) are subject to a 40% tax rate although there is the possibility of a further £175,000 exemption available for passing on property to direct descendants. There are also various reliefs and exemptions available that can help reduce the impact of IHT, such as business relief and agricultural relief. By carefully structuring your estate and taking advantage of available reliefs, you can minimise the tax burden on your beneficiaries.

Protecting your wealth for future generations requires proactive planning and a thorough understanding of the UK's tax and estate laws. By carefully following the above steps, UK investors can ensure that their hard-earned assets are preserved and passed on to their loved ones in the most tax-efficient manner possible. 

Remember, seeking advice from financial professionals is crucial to developing a robust estate plan tailored to your unique circumstances. Get in touch with our expert team today to discuss how we can best protect your assets.


Trophies

Matthew Douglas named as one of the ‘Best Financial Advisers to Work For’ in the UK

We’re very proud to announce that we’ve officially been named as one of the country’s ‘Best Financial Advisers to Work For’ at the 2024 Professional Adviser Awards.

The Professional Adviser Awards ceremony took place on Wednesday 20th March, celebrating the achievements of 24 firms who successfully made the grade, leading the sector with clear workplace policies and practices.

The industry-wide programme is a joint venture between Professional Adviser (PA) and Best Companies Group. It honours the best places of employment in the financial services industry - as voted for by employees and a rigorous company-wide evaluation.

 

Trophies

 

Our Managing Director, Matthew Pescott Frost, shares his thoughts:

“I’m absolutely delighted that Matthew Douglas has been named as one of the best financial advisers to work for in 2024! We really pride ourselves on providing an enjoyable, friendly working environment for all of our employees to flourish and feel like they truly belong.

“We are constantly striving to improve the office environment for our valued team, and are always open to suggestions and feedback from our employees to make the firm an even better place to work. I feel honoured that the responses from our team in their surveys have made such a contribution to this win - accounting for a huge 75% of our overall score.

“I’d also like to offer my gratitude to the teams at PA and Best Companies Group for recognising our efforts, and for all the work they do behind the scenes to make these awards such a great success.”

 

In order to be considered for this prestigious award, we entered a two-part selection process. The first part consisted of workplace policies, practices and demographics being evaluated by the expert judging panel, with the second then consisting of an employee survey to measure experience in practical terms.

These combined scores then determined the top firms, with 25% of the total score coming from the first part and the remaining 75% from the process's employee survey element.

Matthew Douglas would also like to offer our congratulations to the other firms that were named among the ‘2024 Best Financial Advisers to Work For’. This includes:

  • Albert Goodman Financial Planning
  • Amber River True Bearing
  • Balance Wealth Planning
  • Black Swan Financial Planning
  • Boolers
  • BRI Wealth Management
  • Castlefield
  • Connor Broadley
  • Crowe Financial Planning UK
  • Emery Little
  • Financial Management Bureau
  • Fiscal Engineers
  • GSI Wealth Management
  • Hartsfield Planning
  • Informed Financial Planning
  • MKC Wealth
  • Niche
  • Pareto Financial Planning
  • Saltus
  • Sedulo Wealth Management
  • Thomson Tyndall
  • Tweed Wealth Management
  • Vision Independent Financial Planning

This is the third award win for Matthew Douglas in recent months, after being named ‘Best IFA in the East of England’ at the Citywire New Model Adviser Conference & Awards 2024, and securing the MoneyAge Diversity Award in 2023.

You can read more about the 2024 PA Awards here.


How can writing a Will ease Inheritance Tax liabilities?

Almost half of UK adults don’t have a valid Will in place - which can complicate succession and estate planning while opening your loved ones up to a host of Inheritance Tax liabilities. Russell Brett explains why having a valid Will in place is essential to safeguard your assets and protect your family from mounting costs.

Research from the Association of Lifetime Lawyers reveals that almost half of UK adults don’t have a valid Will and one in ten have started drafting one but have yet to finish it. 

Unless finalised and validated by being properly signed by a witness, a Will won’t be considered valid. This opens your estate and your assets up to being divided by the rules of intestacy.

This can lead to claims of contested inheritance and familial problems, as well as the larger and much more ominous consequence of failing to finalise a valid Will: Inheritance Tax.

Having a Will is essential to minimise tax liabilities

Without an up-to-date, verified Will that reflects your current circumstances and lasting intent, unexpected tax levies can become an acute issue for your family in the future. 

If you were to die under such conditions, this would qualify as dying intestate - which means that, legally, your family might be vulnerable to sudden and unexpected tax consequences. The related Inheritance Tax liabilities could severely impact your estate, your assets, and your loved ones’ financial security. 

Update Your Will Week is from Monday 4th to Sunday 10th March 2024 and is a dedicated drive from the Lifetime Association of Lawyers to raise awareness of the wealth of problems leaving a Will incomplete (or worse, non-existent!) can cause.

Even if you have an existing, valid Will, it’s crucial to update this regularly to reflect your current assets and intentions. Going over your changing assets with your financial adviser is just as vital, as it allows you to minimise your tax liability and ensure you’re diversifying risk across your range of investments. 

Power of Attorney is an important concern in later retirement 

Just as planning for the future of your estate and your assets is high on your list of priorities, so too should be setting up safeguards to protect your loved ones and minimise distress in times of uncertainty. As we get older, our minds and bodies may not be what they once were and serious health issues can suddenly make Power of Attorney a critical issue. If you were to suffer an accident, or become mentally incapacitated and unable to make key decisions about your care, quality of life and assets, you’d need someone you trust to make decisions on your behalf. 

A recent survey has found that just 24% of UK adults had discussed implementing Power of Attorney with family, according to YouGov. This leaves over three-quarters open to facing legal challenges if mentally unfit to make their own choices.

Setting up PoA is very important, especially for those of us in later retirement, as it grants those closest to you the legal right to make decisions on your behalf.

If you’re concerned about your investments, assets or family and would like to discuss planning for the future, get in touch with your dedicated financial adviser today. To learn more about Update Your Will week, visit the Association of Lifetime Lawyer’s website at www.lifetimelawyers.org.uk


budget

Our summary of the 2024 Spring Budget

The Chancellor started his speech by claiming that the policies announced in the 2024 Spring Budget will result in “more jobs, more investments and lower taxes”, but the most important question for us is: How will the Budget affect you, our client? 

We’ve put together a simple, clear guide to summarise everything that you’ll need to know about how your finances may be impacted now and in the future.

Investments

New “British ISA” introduced

Chancellor Jeremy Hunt announced the introduction of a British ISA, which will provide a boost to the amount that individuals can save and invest tax-free. The ISA will allow savers to benefit from an additional £5,000 tax-free allowance per year, to be invested solely in UK equity.

This allowance will be on top of the original £20,000 per year limit, allowing savers to invest up to £25,000 per year across all ISAs (as long as at least £5,000 of that figure is earmarked for UK investments). This has been introduced in a hope to boost the amount of investments in UK entities to encourage economic growth.

National Insurance

National insurance cut by 2p, from 10% to 8%

A sizable national insurance cut was at the very centre of the Spring Budget, as it was in November during the Autumn Statement when it was cut from 12% to 10%.

The Chancellor has once again announced that he will be cutting the main rate of national insurance contributions (Class 1) paid by workers by 2p, from 10% to 8% - in effect from 6th April 2024 at the start of the new tax year. He also announced similar changes to national insurance paid by the self-employed (Class 4), falling from 8% to 6%.

Mr Hunt emphasised that the new cuts should save the average employee up to £450 per year, and £350 per year for those who are self employed - cutting rates by a third in the last six months.

budget

Capital Gains Tax

The higher rate will be cut on property sales

Capital Gains Tax (CGT) is to be reduced, with the rate paid by higher or additional taxpayers on residential property being reduced from 28% to 24%. 

While this is positive news, it’s important to note that many individuals will actually see their CGT bills rise as a result of the tax-free allowance being reduced again, from the current limit of £6,000 to just £3,000 in 2024/25.

Pensions

Pension funds will have to disclose domestic asset figures

Pension funds will now have to disclose what proportion of their assets are held in UK equities, adding that further action would be taken if not enough funds are invested domestically. According to supporting information supplied by the Government, the average pension allocation to UK equities currently stands at 6%.

To improve data, the government intends to bring forward requirements for Defined Contribution pension funds to publicly disclose the breakdown of their asset allocations - working closely with the Financial Conduct Authority. Mr Hunt’s long-term aims will be to make it easier for pension funds to invest in the UK.

Piggy bank money

Comments from our Director, Russell Brett

Most of the content of this budget statement was pre-leaked, but as usual there were a few interesting areas of discussion.

The British ISA could be attractive for many of our clients - with the additional £5,000 annual allowance for ISAs available, there is a clear tax benefit - but we should always be mindful that geographical diversification and asset allocation may have a bigger impact on the investment return. This form of ISA product doesn’t actually exist yet, so we will bring you more information as it develops. 

The National Insurance liability decreases will come as welcome relief to those pre-retirement, and the Capital Gains Tax decrease for above basic rate taxpayers could offer some clients an encouraging saving of £400 per £10,000 of residential property gain.

However, the key allowances remain as is from last year’s Autumn Statement, effective as of 6th April - namely, Personal Savings Allowances (£1,000, £500 or £0 per year, depending on your tax bracket), Capital Gains Tax allowance to reduce to £3,000 per year, and Dividend nil rate taxation to decrease to £500 per year.

Overall, it generally felt like a “Buy British” investment theme coming through, as seen in the ISA and Pension comments above. Did someone mention an election this year?! 

The turbulence of recent years under Conservative governance has impacted all of our pockets - although to be fair, they have had some significant issues to manage such as the Covid pandemic and War in Europe, not helped by a constant accusation of general incompetence. However, you can’t help thinking, should a likely Labour government be in Number 10 this year, then how would they pay for these Tory promises with fairly limited money in the pot?

As always, an interesting year…

If you have any queries or concerns regarding the Spring Budget, please don’t hesitate to get in touch with our team, who will be happy to help.


man jumping over clock

The 2024 ISA deadline is fast approaching - act now!

Every year, individuals have the opportunity to top up their ISAs and set aside more tax-free savings. While this can be done at any time throughout the year, there’s an annual limit of £20,000 across all ISAs.

By taking advantage of every possible opportunity to invest your money without being penalised by capital gains tax (CGT), you’ll get the very most out of your hard earned cash.

Investing can be a daunting prospect, so we’ve put together a list of questions we tend to get asked when the ISA deadline comes around to help.

When is the ISA deadline for 2023/24?

The deadline for this tax year is midnight on 5th April 2024. After this time, your allowance resets, meaning that any unused allowance from 2023/24 will be lost. For example, if you’ve invested £15,000 over the tax year, then your remaining £5,000 of tax-free allowance will not be carried over to the 2024/25 tax year.

Your £20,000 allowance can be split across different ISAs if you wish, whether it’s a Stocks and Shares ISA, Cash ISA or Lifetime ISA (just be wary of your £4,000 per year limit with this one). If you have both a Stocks and Shares ISA and a Lifetime ISA for example, you could split this with £4,000 into the LISA, and a maximum of £16,000 into Stocks and Shares to take full advantage of the benefits.

man jumping over clock

Why do I need to act now?

If you don’t utilise your full £20,000 yearly allowance (and have the money sitting there in a standard savings account), then you’re missing out on valuable tax-free savings. Since ISAs are the most tax efficient way to save (besides pensions, however these are not instantly accessible), you’ll be missing out on the financial benefits they bring.

Ultimately, the more you add to your ISA (within your means), the better.

Speak to an adviser

Can I invest more than £20,000 in one tax year?

The simple answer to this question is yes, you can. However, those additional savings must be invested elsewhere, as your ISA limit on tax-free savings will remain at £20,000. 

Depending on the amount of spare funds you have, we’d potentially recommend waiting until the new tax year begins on 6th April if you’ve already invested your full allowance for 2023/24. If you have a significant amount left over after making the most of your ISA allowance, please get in touch with our team of financial advisers who can recommend the next best savings option for you.

Will my allowance automatically reset on 6th April?

Yes, your allowance will simply reset from 6th April, meaning that you can then start to invest again up to £20,000 that tax year without incurring any penalties.

That being said, the government can change the ISA limits from time to time – so it’s important to stay up to date with legislation changes via their website. If you’re a Matthew Douglas customer, we’ll be sure to inform you of any significant changes to your investments as they arise.

I want to make use of my remaining ISA allowance. Can you help?

Yes, of course! At Matthew Douglas, our team of experienced advisers are on hand to help you make the most of your money, no matter what time of year.

If you’re paying into your ISA by bank transfer, debit card, Apply Pay or Google Pay, then you can do this right up until 23:59 on 5th April. If you pay by direct debit, this may have to be a bit earlier.

Get in touch with our team today – we’re happy to help in any way we can.


Vacant seat

Incredible opportunity for young IFAs as 75% set to retire by 2033

Of the 27,000 independent financial advisers in the UK, three-quarters will be of retirement age in the next 10 years. This presents a huge opportunity for younger advisers, who will take up the mantle when their predecessors leave the workforce, explains Russell Brett.

At Matthew Douglas, we believe in the power of diversity - not simply to make a statement but to embed resilience across our entire organisation. A great example of this is the fact that our workforce is incredibly diverse when it comes to the age of our expert Independent financial advisers (IFAs).

At Matthew Douglas, the average age of our varied team members is just 39. This stands in stark contrast to the rest of our sector where 75% of IFAs are aged 50-59, with 20,250 IFAs set to retire by 2033, according to figures from Financial Planner Life podcast director Sam Oakes.

Speaking at the Change Festival hosted by the Chartered Institute of Securities and Investment and NextGen Planners, Sam explained that three quarters of IFAs will be eligible to leave the workforce and accept retirement in the next decade.

Clearly, there’s nothing bad about IFAs being older in terms of quality of service and expertise, but when so many IFAs are close to retiring at the same time, some firms will experience serious problems if they lack diversity.

Filling the vacuum: young IFAs will come to the forefront

More generally, this creates an invaluable opportunity for younger advisers, who will be in the position of looking after the client-base active in the market after this mass exodus from the workforce.

"This is a huge opportunity for the next generation of advisers coming through and those that are thinking of joining the profession," Oakes said. "If they are retiring, the next generation of future advisers will be the ones who will be looking after their clients.”

Matthew Douglas Ltd is prepared to meet the challenge

In October, we won the national MoneyAge Diversity Award and so, unlike some firms, we won’t be frantically recruiting to fill the expected shortfall of advisers as they retire. Instead, we’re organically upskilling our workforce so that when the time comes for them to take over the accounts of their predecessors, they’ll have the practical knowledge to advise clients without qualms or concerns. 

From the client’s perspective, it will be a seamless transition that raises no questions beyond ‘so, how are my financial objectives shaping up?’

To learn more about how you can invest your money wisely to improve your own finances before retirement, get in touch with our expert team.


2024 looking up

Our summary of the 2023 Autumn Statement

The Chancellor’s Autumn Statement may have contained 110 new or altered measures to help grow our economy, but there are a few important announcements which may affect you, our client.

We’ve gone through the full set of changes to compile this simple guide which will summarise everything you need to know about how your finances may be impacted. 

2024 in finance

Pensions

Honouring the ‘triple lock’ commitment

Jeremy Hunt has confirmed that the government will be honouring its commitment to the pensions ‘triple lock’ in full. 

The triple lock is a commitment to increase state pensions by whichever is highest out of average earnings growth, CPI inflation, or the figure of 2.5%. Having been in place since 2011, the policy is very popular and it provides a great deal of financial security for retirement.

As a result, the government will be increasing the full new state pension by 8.5% to £221.20 per week from April 2024, an increase of up to £900 per year. This increase is noted as one of the largest ever cash increases to the state pension.

Pension pot reforms

The Chancellor also announced that he will consult on giving people one singular pension pot for life, giving pension savers ‘a legal right to require a new employer to pay pension contributions into their existing pension fund’. Under the new “Pot for Life” plans, the majority of workplace pension savers will be in funds of £30bn or larger by 2030.

According to Mr Hunt, these reforms could help to unlock an extra £1,000 per year in retirement for an average earner who starts saving from the age of 18.

Inheritance Tax & National Insurance

Despite rumours circulating in recent weeks, the Chancellor announced that there will be no inheritance tax cuts in this year’s Autumn Statement. However, he has confirmed that National Insurance, the national tax based on earned or salaried income only, IS being cut from 12% to 10% for earnings between £12,570 and £50,270. This means that over 27 million people in the UK will benefit from a higher take-home pay as a result. 

For an individual earning a salary of £35,400 per year, they will save over £450 per year as a result of this reduction. These new policies will come into effect from 6th January 2024, rather than when the new tax year begins in April 2024. 

For employees paying the basic rate of tax, the combined rate of income tax and National Insurance will fall from 32% to 30% - the lowest since the 1980s.

Additionally, Class 2 National Insurance (for the self-employed) will be completely abolished, saving the average self-employed individual £192 per year. Those who pay the Class 4 National Insurance at 9% on all earnings between £12,570 and £50,270 will see this cut by 1 percentage point - to 8% - in April next year.

Investing

Individual Savings Accounts (ISAs) are set to be overhauled to enable savers to pay into multiple accounts of the same type for the first time, from April 2024, with the current £20k tax-free allowance remaining unchanged. Savers will also be able to invest in long-term asset funds, including private equity and real estate.

The government has also stated that it will be extending the tax advantages of venture capital trusts and the enterprise investment scheme by 10 years, to 2035.

Younger people will now benefit from being able to purchase fractional shares, which previously was not possible. Additionally, normal Lifetime ISAs will now only be available to those over 18, as opposed to the age of 16 - with Junior ISAs available up until the age of 18, with no overlap.

Comments from our Director, Russell Brett

Jeremy Hunt’s second Autumn Statement seems a little less fraught when compared to the post Liz Truss clean-up times that we saw 12 months ago.

According to the Office of Budget Responsibility (OBR), the books appear a little healthier now for the government, with stronger than expected tax revenues, driven primarily by earnings and price inflation.

However, this environment is undoubtedly challenging - the Institute for Fiscal Studies (IFS) states that the UK overall tax burden has increased to the highest level since 1948, amounting to about 37% of national income by the next general election, likely to be in 2024.

Nevertheless, the UK is now looking to avoid recession, with +0.6% GDP growth expected for 2023 along with slightly higher growth over the coming years. In addition, inflation is expected to continue to decrease to reach the Bank of England’s target of 2%, by the middle of 2025.

This Autumn Statement’s headlines are clearly centered around National Insurance Contributions (NICS), which will help those still in earned or salaried employment, although there is a message here for employers to note - the employee relative burden of NICS may be coming down, but not for the employer. 

Above current inflation State Pension increases will certainly help those in retirement, while the pension Lifetime Allowance appears destined to be removed, and the more flexible ISA investing should benefit both young and old.

If you have any queries or concerns regarding the Autumn Budget, please don’t hesitate to get in touch with our team, who will be happy to help.


Digital Footprints

What are the dangers of cryptocurrency? An exploration of DIY digital investing

Amid fresh warnings over the rising rates of cryptocurrency scams, investment in digital assets is on the rise in the UK with almost 10% of the population partaking. But how safe is DIY investing and what are the potential pitfalls of this novel investment strategy? Russell Brett explains.

What are the dangers of cryptocurrency? An exploration of DIY digital investing - Matthew Douglas Ltd

Nearly 5 million people in the UK currently hold cryptocurrency assets such as Bitcoin, with interest in digital investing on the rise. However, wannabe investors should be shrewd about where they place their hard-earned assets. 

This is confirmed in a direct warning from Lloyds Bank earlier this month, reporting that cyber crime is up by 23% in 2023 compared to last year, with a rising number of investors being defrauded by scams and fraudulent adverts.

What exactly is cryptocurrency?

Cryptocurrency is a form of currency that only exists digitally and not in the physical world. Unlike recognised currencies, it is monitored only by a decentralised system online and not a central authority. 

Part of the widespread interest in cryptocurrency is because it is a relatively new field, which means that there are few regulations determining what investors can and can’t do. However, it also means that, currently,  no bank, government or regulator manages assets held on these platforms.

Assets can be widely accessed - with no accountability

While fewer regulations may sound appealing, it can create a host of problems for users. A key concern is that trading in cryptocurrency opens up would-be investors to a higher likelihood of being targeted by criminals - such as the $3.8 billion fraudsters stole last year alone. 

As your details are all stored online in what is called ‘the blockchain’ they are in effect accessible at all times to would-be hackers. 

 Having a digital wallet also makes it harder to trace spent or stolen assets and if something were to go wrong, the inherent lack of regulation means that no one is held accountable. 

In fact, because it is a system of peer-to-peer trading, the vast majority of the time it will not be possible to retrieve any lost assets. For example, crypto transactions consist of sending assets directly from one user to another - much in the same way you transfer funds between friends and family - rather than a direct debit or recognised transaction.

Follow the ‘three-year rule’ when it comes to investing

Clearly, I wouldn’t advise anyone to trade with cryptocurrency. At the moment, it’s an unregulated system that opens up users to inherent vulnerabilities that by far outweigh any potential gains.

But more than that, if anyone is looking to see a virtually immediate short-term yield, I would advise them against investing altogether. With investments, it’s important to understand that the value of your assets will invariably fluctuate; its worth will go up, down and hopefully, up again. I would advise anyone looking to secure a viable long-term investment with a sustainable yield that they seek to invest for a minimum of three years.

This will give you sufficient time to start to see patterns emerge as markets shift and your assets mature. 

Investing with expert advice is essential

Ultimately, while I can understand the perceived appeal of this type of investing, the risks associated with it are simply too great. The lack of regulation in crypto means that we are likely to see more cyber crime as criminals abuse a system that most authorities are still in the early stages of comprehending - let alone regulating.

If you are considering growing your money in assets that you can understand, and in an organic and tax-efficient way that minimises fees and maximises your long-term yield, I’d always recommend doing it in real, regulated currency under the guidance of seasoned financial professionals - such as our team of expert investors. 

If you’d like to learn more, get in touch today