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Business owners, is poor financial wellbeing among your employees affecting operations?

Research suggests that many employees feel like they’re not receiving enough support to improve their financial wellbeing. It could affect business operations, and cost you money too.

Financial wellbeing isn’t just about income. It covers things like financial literacy, confidence, and having a good relationship with money. As an employer, you can do several things to help your staff feel more in control of their finances and future.

1 in 5 employees say their employer isn’t doing enough to support their financial wellbeing

Amid concerns about rising inflation, 19% of employees feel like their employer isn’t doing enough to support their financial wellbeing, according to CIPD research.

The report found:

• 1 in 8 employees say their pay is not enough to support an acceptable living without having to go into debt to pay for essentials like food and utility bills.
• 27% said their pay is not enough to cope with a £300 emergency.
• Less than half (47%) said their pay is enough to help save for retirement.

Worries about money and long-term financial security can affect mental health, which can affect your business’s performance too.

An Aegon white paper suggests that poor financial wellbeing among employees is costing UK employers £6.2 billion a year. This represents the cost of absenteeism and presenteeism due to financial anxiety.

45% of employees said that financial worries cause them to feel anxious, which led to them taking time off work or being distracted when they’re in the workplace.

Creating a financial wellbeing programme for your business could mean your employees are happier and more confident, which could boost your operations. It can also make your business more attractive when hiring talent in a competitive market.

6 practical steps you can take to support financial wellbeing among your employees

Investing in a financial wellbeing policy is worthwhile.

The CIPD research found that 81% of employees whose employer has a financial wellbeing policy said it’s important to them that any future employer has one in place, so it’s a valued step.

In addition, these employees were far more likely to say their employer does enough to support their financial wellbeing and provides a good level of benefits.

If it’s something you’d like to put in place, here are six steps you could take.

1. Schedule regular reviews and create progression plans

While salary isn’t the only thing that supports financial wellbeing, the research shows that it’s important to employees.

Having regular employee reviews where salary may be discussed can help employees bring up worries they may have and show how they’re providing value to the company through their performance. While you may not be able to meet all salary expectations and goals, being able to have a conversation can be useful.

Making a clear progression plan, which could lead to a salary increase, can also motivate employees and mean they have more confidence about their future.

2. Take the time to explain your workplace pension

The research found that many employees are worried they’re not doing enough to save for retirement.

As most employees benefit from being auto-enrolled into a pension, taking the time to explain how it works, including what you’re contributing, tax relief, and how it’s invested, can be valuable.

Some of your employees may not realise how much is going into their pension or understand how it’ll add up over their working life.

3. Effectively and regularly communicate the benefits you offer

If you offer employee benefits, make sure you show these off and regularly talk about them. Whether it’s a salary sacrifice scheme that can make childcare more affordable or discounts for high street stores, it can be easy for employees to forget about these perks.

Effectively communicating what you offer can highlight how you’re supporting their wellbeing and mean employees are more likely to make use of them.

4. Consider how you could support long-term financial wellbeing

As budgets tighten, many people are worried about how they’d cope if they faced a financial shock. You may already have policies in place to support employees if something happens.

For example, do you offer an enhanced sick pay policy, paid bereavement leave, or group life insurance? Benefits such as these can support long-term security and mean employees feel less worried about uncertainties in the future.

5. Signpost where employees can turn if they’re worried

At difficult times, when struggling with debt or managing their household budget, for example, your employees may benefit from seeking support.

Signposting where trusted advice can be found can be useful and provide someone for them to talk to if they’re not comfortable discussing concerns at work. StepChange can offer advice about managing debt, and many other charities can help people who are struggling.

6. Work with a finance professional to support your employees

If you’d like help creating a financial wellbeing programme to support your employees or want a finance professional to help them understand how they can get the most out of their income and assets, we could help. Please contact us to discuss your needs.

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

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Investment market update: May 2022

Investment markets in May experienced volatility amid concerns that economies could fall into a recession as inflation pressure remains high.

While you may be worried about the volatility your investments have experienced, keep your long-term goals in mind. A long-term time frame can help smooth out the peaks and troughs of markets. This is because, historically, markets have recovered when you look at the bigger picture.

UK

At the end of May, chancellor Rishi Sunak unveiled a package of measures designed to alleviate some of the cost-of-living challenges families are facing.

The £15 billion package will be paid through a levy on the profits of energy companies, known as a “windfall tax”. Among the measures introduced were one-off payments to vulnerable families and support to reduce energy bills for all households.

The measures were made after the latest inflation figures show that, on average, prices increased by 9% in April – the highest level since 1982.

This led to the Bank of England (BoE) raising its base interest rate for the third time this year to 1%. It’s the highest the base rate has been in 13 years after it was cut following the 2008 financial crisis.

Inflation is also affecting the value of salaries. Figures from the Office for National Statistics (ONS) found that regular pay, which excludes bonuses, increased by 4.2% in the three months to March. While this may seem positive at first, once inflation has been factored in, salaries have fallen in value in real terms.

Unsurprisingly, this is affecting consumer confidence.

A consumer confidence index from GfK suggests that sentiment levels have fallen to their lowest point since records began in 1974. The index measures how people view their personal finances and wider economic outlook.

However, according to Barclaycard, consumer card spending grew 18.1% in April when compared to the same period in 2019.  After two years of cancelled holiday plans, the travel sector saw its best month since the pandemic.

From a business perspective, inflation is also affecting operations and confidence.

A report from S&P Global and CIPS found UK factories are facing price hikes. 85% of companies said their purchase prices have increased, while no firms reported a decrease. In addition, new order growth hit a 15-month low.

The poor demand has been linked to a range of factors, including ongoing lockdowns in China, the conflict in Ukraine, and Brexit.

As a result of these pressures, ONS figures show GDP fell by 0.1% in March, leading to concerns that the UK could fall into a recession in 2023.

Europe

The effect of the conflict in Ukraine and the inflation pressure it has led to is reflected in the European Commission (EC) downgrading its growth forecasts.

The EC now predicts real GDP growth in both the EU and eurozone of 2.7% for 2022. This compares to a previous forecast of 4% just three months earlier.

While the European Central Bank (ECB) didn’t make any changes to its base interest rate in May to control inflation, president of the ECB Christine Lagarde has indicated a rise will happen in July.

Data from Germany, the largest economy in the EU, demonstrates the challenges that many European countries are facing.

German producer prices have increased by 33.5% in the year to April, with energy prices surging by 87.3% to drive this increase. Some German businesses are also being directly affected by the conflict in Ukraine – exports to Russia have fallen by nearly two-thirds when compared to last year and are now at their lowest levels in almost two decades.

US

Inflation in the US almost reached a 40-year high in March, with prices rising 8.3% year-on-year. Once again, energy and food prices are driving this rise.

In response, the Federal Reserve raised its interest rate by 50 basis points to a 0.75% – 1% range. The organisation also noted that ongoing increases to the interest rate may be appropriate to try to get inflation under control.

While the University of Michigan’s index of consumer sentiment fell to its lowest level since 2011, data suggests that consumers aren’t cutting back their spending yet. The value of retail sales increased by 0.9% in April.

However, payroll data indicates that businesses are being more cautious than expected. In April, 247,000 new jobs were created, according to ADP. While the number of jobs is still growing, it’s significantly below the 390,000 expected.

US company Apple has lost the title of the world’s most valuable company. As oil prices soared, so too did the value of Saudi Arabia’s oil giant Saudi Aramco, which has now surpassed Apple.

Elon Musk’s bid to buy social media platform Twitter has also continued to make headlines. The $44 billion (£34.8 billion) deal is temporarily on hold as Musk is seeking details about spam and fake accounts. The news led to shares in the company falling by 10%.

Asia

China is also facing challenges as it continues to enforce ongoing lockdowns in certain areas.

The lockdowns, along with consumers cutting their spending – retail sales fell by 11.1% in April – and falling industrial production have slowed the economy’s growth. In turn, there are more unemployed people compared to a month earlier.

Like many other countries, China is battling rising inflation, which has been linked to currency weakness, and food and energy prices rising.

If you’d like to discuss your investment strategy or how events have affected your portfolio, please contact us.

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 investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

26% of people say thinking about finances makes them anxious, as research highlights a link to mental health

More than a quarter of people feel anxious about money, according to research from the Money and Pension Service (MAPS). People that have recently experienced poor mental health are more likely to worry about finances, which in turn can further harm their wellbeing.

The research highlights the link between mental health and feeling in control of finances.

As financial security can affect many other aspects of your life, from your ability to cover daily expenses to planning for your future, it can have a huge effect on your wellbeing. Feeling confident about money decisions is important for mental health.

The research found that 57% of people who have experienced a recent mental health problem say thinking about their financial situation makes them anxious.

There are many reasons why poor mental health can affect financial security. It may mean people need to take some time away from work or that they don’t feel up to making financial decisions. This can lead to poorer financial security which exacerbates anxiety when thinking about money.

The research found that among those who have experienced mental health challenges in the last three years:

• They are four times as likely to be behind on priority bills.
• They are four times as likely to borrow to pay off their debts.
• They are almost three times as likely to often borrow to buy food or pay bills.

Even among people who haven’t experienced poor mental health, many feel anxious when they think about finances. Yet, just 1 in 5 people who are worried about money seek support.

As the cost of living rises and budgets come under more strain, it’s more important than ever to understand your financial situation and seek help if you’re feeling worried.

Caroline Siarkiewicz, chief executive officer at MAPS, said: “We know that money worries and poor mental wellbeing often go hand in hand. This is a challenging time for many people dealing with the after-effects of the pandemic and cost of living pressures. This is tricky enough for anyone, but can be particularly challenging for people also dealing with mental health problems.

“Despite this, we know that many people across the UK generally struggle to talk openly about money.”

5 things to do if you feel anxious about your finances

1. Don’t put off reviewing your financial situation

If you’re worried about money, it can be easy to put off the task of reviewing your finances. If your mental health has been affected, this is even more likely to be the case.

However, being proactive can help you reach a better place financially, feel in control, and boost your wellbeing. If reviewing your finances seems like too much, breaking it down into smaller tasks each day can help. Start with the tasks that are most likely to affect your day-to-day finances, such as your budget or debt you may have, and gradually work your way up to tackling things like your savings or pension.

2. If you’re falling behind on payments, contact your creditors

The MAPS research highlighted how poor mental health can lead to people falling behind on priority bills or increasing the amount of debt they have.

If you’re struggling to keep up with financial commitments, one of the first things you should do is reach out to providers and creditors. It can be a scary thing to do but remember it’s something they will deal with every day.

Creditors may be able to offer support, such as giving you a payment holiday, freezing interest, or creating a long-term repayment plan. By taking this first step of getting in touch, you can begin to improve your long-term financial wellbeing and how confident you feel about the future.

3. Create a budget that prioritises your spending

A budget can help you better manage your finances. By setting out how much you need to spend on different areas, from utility bills to transport, you’re less likely to overspend and find that you don’t have enough at the end of the month.

When creating a budget, prioritise the different areas you need to spend on. Which bills are essential, and which areas could you cut back on if you needed to?

If you have debt, you should prioritise how you repay this too. Where possible, make the minimum payments for each form of debt to avoid falling into arrears, and make overpayments starting with the debt that has the highest rate of interest.

4. Remove temptations to overspend

With online shopping just a few taps away, it’s easier than ever to impulsively buy something and overspend. It’s more likely to happen when you’re suffering from poor mental health as you may seek the short-term boost a purchase can give you.

Making it more difficult to spend money can help you stick to your budget and start to improve your finances as it can give you time to think about whether a purchase is a good idea.

Think about when and how you may overspend. If you’re tempted by online shopping, removing saved card details from your computer or phone and unsubscribing from tempting newsletters can help. If you find you often dip into money allocated for other expenses when you’re out, creating a separate account that holds your disposable money can be useful.

5. Speak to someone about your situation

Several charities and organisations offer support if you’re struggling financially and mentally.

Seeking support and opening up about the challenges you’re dealing with can be difficult, but it’s a step that can give you access to expertise and resources that can help you build financial confidence.

If you’re struggling financially, Money Helper is a good place to start. You can receive confidential debt advice online or over the phone.

If you’re worried about your financial future, such as whether you’re saving enough for retirement, how to support loved ones, or how to get the most out of your money, we can help.

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

Trustees, here is what you need to know about the Trust Registration Service deadline

Being a trustee comes with many responsibilities, and, in some cases, you will need to register a trust with the Trust Registration Service (TRS) by 1 September 2022 or you could incur a fine.

A trust is an arrangement that lets someone, known as the settlor, set money or assets aside for someone else, known as a beneficiary. A trust is managed by a trustee for the benefit of one or more beneficiaries. The settlor may set out how they want the assets in the trust to be used.

There are many reasons why you may set up a trust, from passing on assets to children to generational wealth planning.

As a trustee, you are responsible for managing the assets in a trust and the decisions you make must be done in the best interests of the beneficiary.

Read on to find out if registering a trust you manage is something you need to do.

What is the Trust Registration Service?

The TRS was set up in 2017 as part of an anti-money laundering directive. New rules were introduced in 2020 that require more UK trusts and some non-UK trusts to be registered with HMRC before the September deadline.

Trusts set up after the deadline will have 90 days to register with the TRS.

If you don’t register with the TRS, HMRC will send “nudge letters” and there is a proposed £100 fine for any subsequent offences. If trustees deliberately ignore the requirements, higher penalties could be imposed.

Do you need to register the trust you’re responsible for?

So, which trusts need to be registered before the deadline? All UK express trusts, whether or not they pay tax, must be registered unless they are on the exclusion list.

An “express trust” refers to a trust that was created by a settlor, including those set up in a will, rather than those that were created through a court decision or the operation of the law. Most trusts are express trusts.

If a non-UK trust becomes liable for tax on income coming from the UK or on UK assets, it will also need to be registered with the TRS.

Some trusts do not need to be registered with the TRS even if they are express trusts. The exclusion list includes:

• Pension schemes
• Charitable trusts
• Will trusts that are wound up within two years of death
• Policy trusts that hold financial protection that pays out on death or critical illness.

Registering a trust with HMRC

If you’re a trustee for a trust, you are responsible for registering it with TRS. If there are multiple trustees, you must nominate a “lead trustee” who will be the main point of contact for HMRC.

You can register using the Government Gateway and create an organisation ID.

You can use the gateway to make changes to your registered trust in the future and provide an agent with the authority to make changes too.

You will need to provide information that you can find on the trust deeds and letters you may have received from HMRC, including:

• The name of the trust
• The date the trust was created
• Details about any UK land or property the trust has purchased.

In addition, you’ll also need to provide details for the lead trustee, the settlor, and other individuals or organisations that are involved in the trust, such as beneficiaries.

Information about what’s held in the trust, from cash and shares to material assets, will also need to be provided.

Once a trust is registered, you will receive a PDF copy of a report to show proof of registration that you should keep in a safe place.

If the trust is taxable, you must declare the register is up to date each year by 31 January.

Do you need help managing a trust?

As a trustee, sometimes your role and responsibilities may seem overwhelming.

If you’re a trustee, it’s important to keep up to date with changes and have confidence in the financial decisions you make. We’re here to offer you support.

Whether you have questions about registering a trust with the TRS, want to understand how you can make the most out of assets held in a trust, or even discuss setting up a trust yourself, we can help. Please contact us to arrange a meeting.

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 trusts or estate planning.

Explained: The social care cap and what it means for you

Next year, Boris Johnson’s social care cap will be introduced. So, what is it and what does it mean for you?

The social care cap limits how much an individual will pay for care during their lifetime. It will start in October 2023. The cap is £86,000, but it may not be as generous as it first seems.

The cost of care and the financial decisions someone must make if they or a loved one requires care have been debated, especially as more people are requiring care later in life.

The cost of care varies hugely between locations and the type of care needed. However, according to carehome.co.uk the average cost of living in a residential care home is £704 a week, adding up to £36,608 a year. If nursing care is needed, this rises to £888 a week, or £46,176 a year.

As a result, it’s not surprising that many people are worried about how they will pay for care if they need it and the decisions they’d need to make to fund it.

While a local authority may pay for some or all of care costs, this is means-tested, and most people will need to pay for at least a portion of their care bill. It can mean some people needing to use care facilities are forced to sell their homes or deplete the assets they’d worked hard to secure.

“Daily living costs” are not covered by the care cap

The social care cap will only cover the costs of care. It will not include “daily living costs”. This means care home residents will still be liable for costs such as rent, utility bills, and catering even after they reach the social care cap threshold.

The average daily living costs of a care home resident is difficult to assess. At the moment, many care homes do not itemise bills.

The exclusion of living expenses means it’s still important for people to consider care costs beyond the £86,000 cap.

The distinction between costs has led to criticism of the cap. It’s also received criticism for other reasons, including:

• The cap remaining the same for everyone. Individuals with total assets with a lower value could lose more of their estate, as a percentage, than wealthier individuals.
• Not tackling the issue of what is classified as “social care” rather than “healthcare”. Dementia sufferers, for instance, will often face higher care costs because the support needed typically comes under “social care” rather than “healthcare”.

If the value of your assets exceeds £100,000, you will need to pay for the cost of care

Whether or not you have to contribute to care costs depends on the total value of your assets, this may include things like your savings, property, and investments.

Under the new rules, people with assets under £20,000 will not have to deplete their assets to pay for care. However, they may have to make contributions from their income depending on how much it is.

If the value of your assets is between £20,000 and £100,000 you may get help from your local authority to pay for care costs, this will be dependent on your income and assets.

If your assets are more than £100,000, you will need to pay for all the care costs until the value falls below this threshold.

There are different savings and asset thresholds in Scotland and Wales.

So, once you consider the value of your property and other assets, it’s likely you would need to pay for care until the cap is reached, and then continue to pay for daily living costs.

It’s important to make potential care costs part of your long-term plan

No one wants to think about needing to use care services later in life. However, making potential costs part of your long-term plan can provide you with security.

Not only does it mean you have a fund to use if it’s needed, but it can also provide you with more choice if care is required. It may mean you’re able to choose a facility that offers the services you want or a residential care home that’s closer to your family and friends.

We can help you put a financial plan in place that will help you reach your goals and provide you with security when things don’t go to plan. Please contact us to talk about care and the steps you can take to create a care fund.

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

52% of savers don’t understand the effects of inflation, and millions think they’ll be better off. Here’s why it can harm your savings

Inflation has been in the news for months now, as the rate increases. While you may notice the effects inflation has on the price of goods when you visit the supermarket, it can be more difficult to understand how and why it’ll affect things like your savings.

More than half of cash savers don’t know what effect inflation will have on the value of their savings, according to a Legal & General survey. And 13% believe inflation will leave them better off.

However, the opposite is true – inflation can harm the value of your savings.

Interest rates may be rising, but in real terms, the value of your savings is likely to fall

One of the steps the Bank of England is taking to control inflation is to increase its base interest rate.

As a result, after more than a decade of only benefiting from low-interest rates, the amount you earn from your savings may be starting to gradually rise.

For this reason, some may think that inflation, through the steps taken to control it, is having a positive effect on their savings. After all, the amount being added to your account in interest has increased.

To get a true picture, you need to consider how the value of your savings has changed in real terms.

In the 12 months to April 2022, the rate of inflation was 9%. So, if the interest rate you’re earning on savings is below this, the spending power of your savings falls. This is because as the cost of goods and services increases, your savings will gradually buy less and less.

While your savings may be growing thanks to interest, in real terms, the value is probably falling.

Even with interest rates rising, it’s likely that the interest your savings are earning is far below the rate of inflation. For your savings to maintain their value, the interest rate needs to keep pace with inflation.

As a result, rising inflation could harm the value of your savings and affect long-term plans.

54% of cash savers haven’t taken any action despite inflation rising

More than half of savers haven’t taken steps to limit the effects of inflation on their savings. In fact, 54% plan to keep their money in cash for the long term.

You may think the effects are small, but they can add up. If the high inflation environment continues for the next five years, it’s estimated that inaction could cost £21 billion collectively, according to the Legal & General research.

If you had £1,000 in a cash savings account earning 0.26% each year while inflation was 7%, it’d take just 11 years for the value of your savings to half in real terms.

There are still good reasons for maintaining a cash savings account. If you’re saving for short-term goals, a cash account often makes sense. Having your emergency fund in an accessible cash account is also important.

But, if you’re saving with long-term goals and financial security in mind, investing could present an alternative option.

How could investing help your savings keep pace with inflation?

Investing your money provides an opportunity for your wealth to outpace inflation, so they are growing in real terms.

Traditionally, stock markets have delivered better long-term returns than inflation and interest rates on savings. As a result, it can mean your spending power is preserved if you’re saving for a long-term goal. If you’re saving for goals that are more than five years away, investing can make sense.

Just because investing can deliver larger returns doesn’t mean that every investment is right for you. All investments have some risk, and it’s vital that you build a portfolio that reflects your risk profile and circumstances.

It’s also important to note that investment returns cannot be guaranteed and that it’s likely you will experience short-term volatility at some point. This means that the value of your investments may fall. However, you should take a long-term view as, historically, markets have recovered, even from sharp declines like the one at the start of the Covid-19 pandemic.

If you’re among those that hold cash savings and haven’t taken any steps to limit the effects of inflation, reviewing your financial plan now can help you get the most out of your assets.

Whether investing is right for you, or another option makes more sense, we can help you review your current finances and build a plan that’ll help you reach your goals. For many, this will include investing for the long term, and we’re here to answer any questions you may have and create a balanced portfolio with your goals in mind.

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 investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.