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After 2 “once in a lifetime” economic events in 12 years, how can you protect your assets?

In the space of just 12 years, the global economy experienced two events that are considered “once in a lifetime” occurrences. As well as having an impact on economies, the 2008 financial crisis and 2020 Covid-19 pandemic are likely to have affected your finances too.

Many people will remember the impact of the 2008 financial crisis that triggered a global recession and the uncertainty it caused. From job insecurity to large falls in the markets, it had a far-reaching impact. Then, just 12 years later, the Covid-19 pandemic created uncertainty again.

While government support in the UK through the furlough scheme has helped to protect jobs and limit redundancies, it’s come at a cost. The latest fiscal report from the Office for Budget Responsibility show that over £1 trillion was added to the public debt, which is now above 100% of GDP for the first time since 1960.

With two unlikely events occurring so close together, can this be put down to bad luck? The report warns that while there are no guarantees, larger economic shocks could become more common.

The report says: “The arrival of two major economic shocks in quick succession need not constitute a trend, but there are reasons to believe that advanced economies may be increasingly exposed to large, and potentially catastrophic, risks. While the threat of armed conflict between states (especially nuclear powers) appears to have diminished in this century, the past 20 years have seen an increase in the frequency, severity, and cost of other major risk events, from extreme weather events to infectious disease outbreaks to cyberattacks.”

The report outlines the fiscal impact of the events and how to mitigate risk at a national level. But what can you do as an individual investor to protect your assets?

1. Think long term

One of the most important things to do when making financial decisions is to keep the long term in mind.

While investors experienced high levels of market volatility in 2020 due to the pandemic, this has calmed in the space of a year. Many investors who held their nerve and stuck to their investment strategy have seen their investment values recover or even rise in the months since. The same can be said of the 2008 financial crisis. It may have taken longer for the market to recover, yet, when you look at the bigger picture, investments overall did recover from the crash.

It can be easier said than done when an event is happening, but focusing on your long-term goals can help. If you’re saving for retirement in your 40s, market volatility is unlikely to knock your plans off course. That’s not to say you should never make changes to your plans or adapt. However, these should be carefully considered rather than knee-jerk reactions to what’s happening now.

2. Diversify your assets

Both the 2008 financial crisis and the 2020 pandemic have highlighted how interconnected the world is. Events happening on the other side of the world can quickly spread and influence markets globally.

However, even during these periods of downturns, some sectors were stable and, in some cases, even thrived in the circumstances that were negatively affecting others. Spreading your wealth across various assets and investments can help reduce the impact should markets experience volatility. This may mean choosing to invest in companies that operate in various industries, geographical locations, and have different risk profiles.

3. Understand the risks

You can’t eliminate risk entirely, but that doesn’t mean you can’t manage risk or ensure that you take an appropriate amount for you.

All investments come with some risk. However, investments can have very different risk profiles. An established company with a record of delivering profits and growth is likely to be far less of a risk than a start-up. It’s important to understand your own risk profile, which should consider a range of factors, from goals to other assets, when making any decisions.

As a general rule, higher-risk investments have the potential to deliver higher returns. So, it can be tempting to invest in higher-risk ventures. However, if this doesn’t align with your risk profile, you could end up taking far more risk than is appropriate for you and potentially lose your initial investment.

Not all your investments need to have the same risk profile. As you create a diversified portfolio, you want the overall portfolio to reflect your investment needs.

If you would like to discuss your financial plan and the decisions you need to make about assets, please contact us. We can work with you to create a plan that puts you on the right path to reach your goals, with potential risks in mind, so you can pursue your goals with confidence.

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.

Scams rarely result in fraud convictions; most victims lose their money

While protection for scam victims is improving, the startling truth is that most scammers are not caught, and victims lose their money. It can have a devastating impact on your financial security now and in the future.

According to new statistics from Quilter, just 1 in 700 incidents of fraud resulted in a conviction in 2019. The findings also show that the conviction rate is falling. Since 2011, fraud convictions have fallen by 10% on average year-on-year. With many cases of fraud thought to go unreported, the gap could be even larger.

There are many reasons why convictions for fraud are low. It can be difficult to prove, and the cost of investigating is high. However, for victims, it often means they don’t get the justice they deserve or compensation. Being vigilant is important to keep your savings safe.

It can be easy to think you’ll never fall for a scam. But the last year has proven how inventive scammers can be and that they will pray on victims when they’re vulnerable. Taking advantage of pandemic confusion, some fraudsters have been posing as NHS Test and Trace staff to gain access to people’s home and personal details, leading to Action Fraud issuing a warning.

Figures from Action Fraud highlight the huge impact fraud can have on financial security:

• In the first four months of 2021, £1.8 million was lost to pension fraud
• Over £63 million has been lost to social media investment fraud.

Just as worrying is that victims of scams are often targeted again. Fraudsters may pose as someone offering help or even share your details with other scammers. According to data from the National Fraud Intelligence Bureau, over £373 million was lost by repeat victims in 2019/20, with the average victim losing £21,121. For those falling prey to investment fraud, the figure was £84,604.

What protection do scam victims have?

In many cases, victims of a scam cannot get their money back. However, there are some protections in place.

Banks have often refused to provide compensation because, in many cases, the customer has technically authorised the transfer. This applied even when a victim was targeted by a sophisticated scammer, who may have appeared to be calling from the bank or other reputable organisation.

Since 2019, some banks have committed to a code of conduct to refund victims of scams. However, this usually requires customers to take due care when authorising payments, such as checking bank details. As a result, it’s not guaranteed that you’ll receive the amount you’ve lost back even if you use one of these banks.

There is also little protection in place if you transfer money from an investment account or a pension. In most cases, the money is not recoverable. As a result, it’s vital that you take steps to protect your assets and carefully think through any financial decisions you make.

If you’re making financial decisions, here are three things to keep in mind to reduce the chance of falling victim to a scam.

1. Don’t rush into making decisions

If you’re approached with an exciting offer, it can be tempting to jump right in and start benefiting from it. Even more so if the offer has a time limit on it. But you should always take a step back and thoroughly weigh up the pros and cons.

What may seem like a good choice when you first hear about it, can rapidly change when you delve into the details. A fraudster will try to encourage you to make a knee-jerk decision and limit the amount of time you have to think an offer through. Always take a step back to look at the finer details and think about how it’d fit into your overall plan.

2. Always check who you’re speaking too

Scammers may pose as someone genuine and trustworthy to gain your confidence. Some may even appear to be associated with genuine businesses. For instance, through number spoofing, a call may look as though it’s coming from your bank when it’s not. Or a scammer may claim to be from a real financial advice firm.

Don’t take someone’s word for it when they say where they are calling from, especially if the contact is out of the blue. A genuine professional will understand why you’re being cautious. Your first step should be to check the Financial Conduct Authority register. Here, you can find the details of regulated financial firms. You should use contact details here to get in touch with the firm directly.

Those few minutes you spend checking could save you thousands of pounds.

3. Compare the offers to other options

When you look at other options, how does the offer compare? Remember, if it sounds too good to be true, it probably is.

For example, all investments come with some level of risk. An opportunity that claims to provide guaranteed returns or to be low-risk, high-return is likely to be a scam. Or a pension that you can access earlier than usual, currently 55 and rising to 57 in 2028, should set alarm bells ringing.

If you’ve been approached with an opportunity and aren’t sure if it’s a scam, please contact us. We’ll help you understand what your options are and highlight the risks.

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

Good Money Week: The beginner’s guide to “ethical” money

Have you ever thought about the impact your money has? You may have considered how your money is invested, but how about where your money is saved? Good Money Week raises awareness of sustainable, responsible, and ethical finances. This year it runs between 2–8 October, making now the perfect time to learn more about the impact your money has.

But what does “ethical” money mean?

There are pressing global issues, from climate change to inequality, and, in many cases, companies are contributing to these problems in some way. You may already make decisions in light of these challenges, such as choosing fair trade grocery products or clothes made from sustainable materials. Ethical finance means making the same thought process a part of your financial decisions. How you use money, whether spending or saving, has an impact on the world.

When you think of ethical decisions, climate change and the environment may spring to mind, but the term encompasses far more than this. It could also mean how a company treats its employees or an executive’s bonus pay, and whether these reflect your values.

Ethical money decisions are becoming more popular. According to an FT Adviser report, ESG funds, which take environmental, social, and governance factors into consideration, accounted for 90% of equity inflows in July.

If you want to reflect ethical values in your financial decisions, where should you start?

Review your savings account

When saving, you probably focus on the interest rate, but the account and provider you choose can have an impact on the world too.

You can choose a bank or building society that has internal ethical policies, such as promoting gender equality within the workplace or paying a living wage to all staff.

It’s common to view savings as static, that the money you place there simply stays in your account. However, providers use this money for a variety of purposes, such as lending money to people and businesses. Does the bank or building society use your money in a way that aligns with your values?

It can be difficult to know if your bank is ethical or how it compares to your views. The Good Shopping Guide provides a rating table that allows you to compare different options and see how different organisations are rated across a range of criteria, from political donations to environmental destruction.

If you decide to switch your current account, there is a seven-day switch guarantee that makes it simple. Your new bank will switch your payments, such as direct debits, then transfer your balance, and close your old account within seven days.

Choose ethical investments

As mentioned above, ESG investing is on the rise, and it may be something you want to consider too.

ESG investing doesn’t mean discounting the usual considerations you make. You should still consider things like your investment goals and risk profile. However, in addition to these factors, you’ll also look at how a company’s practices have an impact on environmental, social, and governance issues.

It is possible to select investments with your own ESG criteria in mind, but this can be a time-consuming process and requires a lot of resources. For most investors who want to incorporate ESG issues into their portfolio, they can choose an ESG fund that aligns with their financial situation and values. This allows you to invest in a variety of companies that meets the fund’s criteria.

Remember, your pension is invested too. As your pension is typically invested over decades, the decisions you make can have a large impact. Usually, your pension will be invested in a default fund if you don’t choose one. However, there will often be several funds you can choose from, including an ethical fund or ones with different risk profiles.

You should consider your risk profile before switching your pension, as returns could affect your retirement plans. If you do decide to switch your pension fund, it’s often possible to switch by logging into your online account.

Do you want to reflect your ethical values in your financial decisions? We can help you understand what changes you could make to your finances. Please get in touch if you have any questions.

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.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

Has Covid-19 affected your pension? Here’s how to weigh up the impact and rebuild it

Lockdowns and restrictions have affected the financial security of millions of people. While the short-term impact has been the focus, it could have a long-term effect on your financial security too if it affected your pension savings.

Over the last 18 months, those who faced financial uncertainty in the pandemic may have cut back pension contributions, stopped paying into their pension altogether, or even dipped into their savings. These actions can have a long-lasting impact at any point in your working life. But it’s particularly worrying for those who are nearing retirement.

The over-50s have been among the most affected by the pandemic. According to a Scottish Widows study, this age group were the most likely to face job and income losses. Almost a quarter (23%) of people in their 50s lost their job or income due to the impact of Covid-19.

This age group also has more self-employed workers. Some 17% of people in their 50s are self-employed, compared to only 12% of 25–49-year-olds. With less job security and gaps in government support, self-employed workers have faced challenges. More than half of self-employed workers said their finances have suffered.

As a result, it’s not surprising that more than half of over-50s fear running out of money in retirement.

Did you reduce or stop your pension contributions?

When money is tight, the first step is often to review where you can cut back. As your retirement might be some time away, reducing or stopping pension contributions can seem harmless. But the impact might be bigger than you think.

Your pension doesn’t only miss out on the contributions you make. You could also lose tax relief and employer contributions. On top of this, your pension is usually invested and benefits from the effects of compounding over the long term. A relatively small break or reduction in pension contributions can have a much larger impact when you assess the forecast value.

So, how does this affect your retirement?

In some cases, you’ll still be able to meet your retirement goals even though you’ve changed your pension contributions. But it’s important to check. A quick review means you can still look forward to your retirement in confidence or highlight where there may be a shortfall.

A pension shortfall doesn’t mean you have to give up retirement dreams. The sooner you know, the better the position you’ll be in to make changes. A small increase in pension contributions once you’re more financially secure could mean you bridge the gap by the time you retire.

What’s important is that you understand the long-term implications changing your pension contributions could have. If you’d like to talk to a financial planner, please contact us.

2 things to keep in mind if you’ve dipped into your pension savings early

If you’re over the age of 55, you may have accessed your pension to tide you over during the pandemic. While useful, you also need to consider whether it could affect your retirement lifestyle.

According to Scottish Widows, the number of over-55s dipping into their pension savings has jumped 10%. In the first three months of 2021 alone, 383,000 people withdrew money from their pensions. While some may be ready to retire, the jump suggests that thousands of people are using their pensions to cover the financial impact of the pandemic.

If you dipped into your pension early, here are two questions to answer.

1. Will it affect your retirement?

As with changing your pension contributions, you should first assess the impact of making an early pension withdrawal. Your pension is designed to provide you with an income throughout retirement. Taking a lump sum early could mean that you’re no longer on track to achieve the lifestyle you want.

Do you still have enough to reach your retirement goals, or do you need to increase your contributions? It can be difficult to understand how a pension will translate into an income. If you need some help with this, please contact us.

2. Has it reduced your Annual Allowance?

If you’re not ready to retire yet, you may want to continue paying into your pension. Accessing your pension can trigger the Money Purchase Annual Allowance (MPAA), which reduces the amount you can tax-efficiently save through a pension.

Usually, you can save up to £40,000 or 100% of your annual earnings, whichever is lower, into your pension each tax year while still benefiting from tax relief. However, once the MPAA is triggered, this is reduced to just £4,000. It can have a huge impact on the amount you’re able to tax-efficiently save between now and retirement, and, therefore, towards your retirement income.

If your pension savings have been affected, you don’t need to panic. There are often steps you can take to ensure your retirement plans stay on track. Being proactive and assessing the impact now means you can bridge a gap if necessary. Get in touch if you need to assess your pension.

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. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

Why switching to a sustainable pension is the best thing you can do to tackle climate change

From ditching the car to recycling your waste, you probably take a range of steps to help protect the environment and our planet. As the world slowly moves towards sustainable, green energy, perhaps you want to do even more to help fight climate change?

You might think you’re doing everything you can to go green, but did you know that you can help the environment with your pension? By investing your pension into a sustainable, or ethical fund, you could significantly reduce your impact on the environment.

The Financial Times reports that a pension worth £100,000 invested in a sustainable fund could be the equivalent of taking five or six cars off the road a year.

Ethical pensions have recently risen in popularity, alongside many other funds with a focus on ESG principles. ESG stands for “environmental, social, and governance”, which cover some of the factors sustainable portfolios may consider, alongside financial factors, when making investment decisions. And investing through ESG funds doesn’t mean your investments will yield lower returns either.

Read on to find out more about sustainable pensions.

Switching to a green pension could be 57 times better for the environment than going vegan

With the power to tackle climate change by simply switching your pension, there’s no need to drastically overhaul your lifestyle.

As Pensions Age report, your pension pot alone could do more for the environment than 57 people switching to a vegan diet. In fact, a sustainable pension could be 21 times more effective than giving up flying, becoming vegetarian, and switching to a renewable energy provider combined.

They even claim that a sustainable pension could be 20 times better for the environment than switching to an electric car, which is already one of the other most effective methods of tackling climate change.

Euronews reports that transitioning an average-size pension pot (around £30,000) to a sustainable pension could reduce as much as 19 tonnes of carbon emissions a year.

If you have a pension pot of £100,000, you could be cutting as much as 64 tonnes of carbon emission each year. That is the equivalent of nine years’ worth of the average citizen’s carbon footprint.

A sustainable pension is a way to fund ideas you believe in

Which? states that there is an estimated £3 trillion in UK pensions that are used to fund everything from wind farms to essential government services. However, only 22% of pension holders know the types of company that their pension is invested in.

A sustainable pension avoids putting your investments into certain companies, depending on the policies of the specific fund you choose. For example, they may not invest in the assets of oil companies and instead invest in electric motors.

If you don’t like the thought of your money going towards tobacco producers, weapons manufacturers, or high-emission companies, a sustainable pension may be right for you.

From climate change, to education, and gender equality, there are plenty of options for your investment. After all, the main goal of an ESG pension is to represent the views of those invested in it.

A significant number of pension providers have announced their plans to make their default pension services have net-zero carbon emissions by 2050. For some providers, this is the goal with their entire portfolio.

Investing in a sustainable pension helps both your future, and the planet’s

One concern is that there is too much focus on sustainability instead of profitability. With more than 200 pension funds already being labelled as “sustainable”, do they really perform as well as those without such a strict focus?

The data suggests that yes, they do. Which? reported the findings of a Morningstar analysis, which found that three-quarters of ESG funds performed above average when compared with similar, standard funds.

They may also provide greater longevity and security, as 77% of ESG funds available from 2009 were still going in 2019. This is compared to just 46% of non-ESG funds.

The pressure of well-performing ESG funds is also encouraging firms to improve their pension policies. The more sustainable pensions that are made available, the more widespread the positive impact.

Sustainable pensions are a step forward

It is no doubt that sustainable pensions are a step forward. Switching to a sustainable pension is a great way to help support ideals that you believe in while also supporting yourself in later life.

A sustainable pension fund invests in the ideas you believe in. And, with the returns often just as positive as traditional pension funds, sustainable funds provide a beneficial alternative for pension contributors.

Are you interested in learning more about sustainable investments? We’re here to help you understand how ESG factors can be incorporated into your portfolio.

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. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

Guide: The guide to later-life planning and care

When you think about your future, how far ahead do you plan? Perhaps you’ve thought about what your life will look like in 10 years, but have you considered your later years?

While retirement planning is common, it’s often the early years of retirement that people focus on. However, your needs and lifestyle wishes can change drastically over a retirement that could last decades. It’s just as important to think about how you’ll spend your later years as those first years when you are still celebrating retirement.

You can download The guide to later-life planning and care to start thinking about your long-term plan. It’s here to help you understand why it’s important and what steps you can take. It covers:

• Reasons to make later-life planning part of your financial plan
• How to create long-term financial security
• Why care is something you should think about.

If you have any questions about your long-term plan or care, please contact us.

How financial planning can help you strike a better work-life balance

Financial planning is about much more than simply growing your wealth. Not only can it reduce financial worry, but it can help you achieve long-term goals, reduce stress levels, and increase your mental wellbeing.

Perhaps you feel like you don’t have enough time to spend with those you love? Or maybe you’re striving for early retirement but you’re not sure how to get there? Financial planning exists to guide you through these issues with confidence.

Pandemic burnout and the increased work week

Covid-19 has influenced almost everything since early 2020. The Guardian reported earlier this year that UK workers have increased their working week by 25% since working from home.

In the UK, the average time spent on a business network each day increased from 9 to 11 hours. However, employees aren’t the only people affected; two in five company owners reported struggling with depression, anxiety, or exhaustion in 2020 and early 2021.

Not only have people been working longer hours, but now the line between work and leisure has blurred. Many people have complained of an inability to switch off after a workday.

Financial planning could help to strike a much-needed balance between work and life. But how?

Helping you strike a better work-life balance

Often, financial planning is associated with building wealth. While this may be part of the process for some people, it’s not always the case. Financial planning focuses on how to help you achieve your goals.

If you’re in a position where you want to start cutting back working hours or taking other steps to achieve a better work-life balance, financial planning can help you understand what your options are. By looking at what is most important to you, a bespoke financial plan could give you the option to reduce how much time you spend on work. In some cases, this may include cutting back on outgoings, depleting wealth, or adjusting other steps you’ve been taking.

Rather than assessing how much money you have, the process of financial planning is about understanding what makes you happy and how money could you achieve these things. With work affecting other aspects of life, rethinking your work-life balance could improve your wellbeing.

A demanding job may mean you’re able to afford a nice car or a large family home, but if you’re unable to take the car for a drive or spend as much time as you’d like with loved ones, is it worth it?  For some, rethinking their job will be appealing.

According to an Aegon report, just 4 in 10 people have thought about what gives their life joy and purpose. Spending some time thinking about this and making the answer central to your plans could help you get more out of life.

So, how does financial planning help here? It can help you understand the type of lifestyle you could still achieve if you did step back or how other assets can bridge an income gap. It can give you the confidence to create a work-life balance that suits you.

Striking the right balance as you near retirement

It’s not just getting about getting the right work-life balance now either. Financial planning can help provide more opportunities in your later years.

Since Pension Freedoms were introduced in 2015, which gave retirees more flexibility when accessing their pension, transitioning into retirement has become more common. Cutting back working hours or moving into a less demanding job has become a popular way to ease into retirement. It can help you create a work-life balance that suits your lifestyle goals.

Transitioning into retirement is appealing for many as it can still provide structure and meaning to your days, while still giving you more free time.

But is it something you can afford to do? Or are you hoping to retire earlier than the traditional retirement age?

Financial planning can help you take steps to give you the freedom to create the retirement lifestyle you want. It can give you the confidence you need to make retirement decisions that make sense for you.

If you’d like to discuss your finances and how they can help you live the life you want, 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.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

Investment market update: July 2021

The pandemic recovery continues to pick up pace in economies around the world. However, there are still reasons to be cautious and signs suggest the pace of growth is beginning to slow in some regions.

According to the OECD (Organisation for Economic Co-operation and Development), the recovery is picking up for leading economies as vaccination progress means their lockdown measures are beginning to be eased. However, the IMF (International Monetary Fund) has warned that a failure to support poor countries fight Covid-19 could cost the global economy $4.5 trillion (£3.24 trillion) by 2025.

UK

The UK’s economy continues to grow, but the pace is slowing. In May, the economy expanded by 0.8%, figures from the Office for National Statistics (ONS) show. This is weaker than the 1.5% expected and means the UK economy is still 3.1% below pre-pandemic levels.

One of the challenges the government now faces is repaying debt. To provide household and business support throughout the pandemic, the government borrowed at record levels. In July, government debt interest payments were a record £8.7 billion, around three times the amount paid just a year earlier. This is partly due to government bonds being linked to inflation, which has increased as lockdown measures have lifted.

The Office for Budget Responsibility stated that UK debt stock is increasingly exposed to shocks from both inflation and interest.

July’s Freedom Day, when lockdown restrictions lifted, led to a boost for hospitality, retailers, and pub chains. In line with this, the CBI (Confederation of British Industry)reported strong retail sales in July, with in-store transactions up 23%.

CBI figures also show UK factory output surging, with new orders reaching their highest levels since the 1970s. The IHS Markit PMI (Purchasing Managers Index) for the service sector was 62.4, a slight easing from the 24-year high recorded in May, but still strong growth.

One of the challenges businesses across many sectors identified is the “pingdemic”. With members of staff needing to self-isolate, some firms are struggling to continue operating even as restrictions lift.

Brexit also continues to have an impact on the UK economy. According to ONS, UK exports to the EU increased by £1 billion (5%) in the first five months of 2021. However, imports are still weak.

Chancellor Rishi Sunak also revealed that post-Brexit talks, centred on providing UK financial firms access to the EU, have stalled. He suggested that Britain would diverge from Brussels’ rules on financial services.

Europe

Figures from Europe are mixed, and Christine Lagarde, president of the European Central Bank, cautioned that the recovery in the eurozone remains fragile.

While the eurozone PMI composite hit a 21-year high of 60.6, placing it firmly in the growth zone, factory output dipped by more than expected. Industrial production fell by 1% in May, according to Eurostat, leading to questions around the strength of the eurozone recovery.

In other news, the EU has fined Volkswagen and BMW £750 million. The two motor companies were colluding with Daimler to delay emissions-cleaning technology, breaching EU antitrust rules in the process.

US

Signs suggest that the US economy is continuing to grow, but the pace is slowing down.

The latest PMI figures indicate that the boom seen as pandemic restrictions lifted is easing. The US recorded 59.7 in July in the PMI Output Index. While this is still in growth territory, it’s markedly down from the 63.7 recorded in June.

GDP figures also support this. In the second quarter of 2021, the US economy grew by 6.5%. While positive, it’s far below the Wall Street forecast of 8.5%.

However, job figures provide some positive news. At the beginning of July, the US reported 850,000 new jobs as American companies continued to take on more staff. The figure is a significant improvement on the 700,000 expected and points towards growing business confidence.

Asia

China’s ongoing crackdown on technology companies hit stock markets across Asia. Beijing has tightened restrictions on overseas listings of Chinese companies, as this puts tech companies under more scrutiny. The measures have affected the stocks of some of the region’s largest tech companies, including Tencent and Alibaba.

While China is expected to post growth of around 8% for the second quarter of 2021, it’s a marked slowdown when compared to the first quarter record of 18.3%. To encourage a boost in lending, the People’s Bank of China, the country’s central bank, has cut the amount of cash banks must hold in reserve.

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.

5 signs you could benefit from income protection

September will mark the first Income Protection Awareness Week. Income protection can provide financial security when you need it most, but it’s often something that’s overlooked. If you recognise these five scenarios, it may be worth looking at how income protection could fit into your wider plans.

1. Your employer doesn’t offer sick pay

It’s worth looking at the benefits your employer offers when weighing up the pros and cons of income protection. You should check what your employer’s sick pay policy is and how long it lasts.

Many employers offer an enhanced sick pay policy that means you’d continue to receive an income in the short term if you were unable to work. However, it’s worth noting that these policies rarely go beyond 12 months. So, an income protection policy with a long deferment period may still be beneficial.

If your employer doesn’t offer sick pay, you will usually receive Statutory Sick Pay (SSP) if you need to take time off. SSP pays £96.35 each week in 2021/22 up to a maximum of 28 weeks. Relying on SSP alone can mean you face serious financial difficulties if your income did stop due to illness.

2. You are self-employed

If you’re self-employed, taking time off work can have a huge impact on your income and may even affect long-term projects. It may mean you’re tempted to work despite being ill or that you rush back too soon without giving yourself enough time to recover. Receiving a reliable income through an income protection policy means you can focus on your health without having to worry about financial security.

3. Your emergency fund wouldn’t cover essentials

If you have to rely on your emergency fund, how long would it last? An emergency fund is an excellent option for providing short-term financial security if the unexpected happens. This money should be readily accessible and ideally cover three to six months of expenses.

If your emergency fund wouldn’t be enough to provide peace of mind, income protection could help.

While your emergency find may provide security for a few months, if a long-term illness affected you, you could still find that you face financial insecurity. Again, income protection with a long deferment policy can give you confidence while reducing premiums in this case.

4. Your salary is the main income source for your family

Your income may be essential for your family’s finances. If you have dependents, taking additional steps to ensure financial security if the unexpected happens becomes even more important. Losing income even for a few months could mean significant lifestyle changes for your family and may affect long-term prospects if you’re forced to dip into savings.

5. You don’t have any passive sources of income

If you have a passive income, such as from investments or rental properties, you may be able to cover the essentials and maintain your lifestyle without your salary. However, if your entire income relies on you being able to go to work, it’s worth thinking about how income protection could provide certainty.

How much does income protection cost?

Income protection will pay out a regular income if you’re too ill or injured to work until you can return, retire, or the policy ends. It can be difficult to put a value on that, but often income protection is cheaper than you think.

Many things will influence the cost of income protection. This includes decisions you make when selecting a policy, like the level of cover you want or how long you’ll need to wait before making a claim. Your health and lifestyle can also have an impact, from your age to whether you smoke. As a result, it’s important to receive quotes that are tailored to you but don’t simply dismiss income protection as expensive.

As with all financial decisions, you need to consider if income protection is right for you. Spending some time contemplating how you’d cope financially without your income can help you assess if income protection can add value to you. If you’d like to discuss whether it makes sense for your circumstance or need help choosing an appropriate income protection policy, 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.

Cashflow modelling: How it can give you confidence in your choices

When you’re making financial decisions, one of the challenges is understanding the impact that it could have on your long-term finances. Not understanding the impact means you’re unsure what you should do, or when you do make a decision, you still won’t have full confidence in it. Financial planning can help you weigh up the short- and long-term implications.

Cashflow modelling is just one of the tools that can help create a plan you can rely on when working with a financial planner. Even if you’ve used cashflow modelling before, you might not be aware of how it works or how it adds value to your plans. Read on to find out.

What is “cashflow modelling”?

Cashflow modelling is used to forecast your financial future. It can help you understand how your wealth and income may change, whether you want to look 5 years ahead, or 30. It’s a way of answering questions like: “Do I have enough money?”

The first step when using cashflow modelling is to input data. This may include how much you have saved in your pension, your current income, or the size of your investment portfolio. It’s important these figures are accurate as they provide the foundations for calculations.

On top of this basic information, you can add extra details that will provide a forecast. This information is based on assumptions that may include:

• The annual return of your investments
• Adding a certain amount to your pension until you reach pension age
• The rising cost of inflation and how it will impact your outgoings.

It’s important to note that you can’t guarantee these assumptions will happen, but they help build a relatively reliable picture of how your wealth will change over time. This can give you confidence in how financially secure your future will be. With this information, you can see where gaps are, allowing you to take steps to bridge them sooner.

Helping you make big financial and lifestyle decisions

When managing finances, you’ll face some big decisions. It can be difficult to know what the right option is. When using cashflow modelling, you can add new assumptions that will forecast your wealth based on different scenarios. This means you can answer questions like:

• Would I run out of money if I retired five years early?
• Would providing a financial gift to my children now affect my future?
• Can I afford to take a lump sum from my pension to travel now?
• Can I take a larger income from my pension and still have enough for the rest of my life?

Cashflow modelling lets you see how moving ahead with these types of decisions will affect your income now and in the future. It can help put the decisions you’re making into context. For example, if taking a lump sum from your pension to travel now meant a lower income in the future, would you do it? For some, travel will be a priority that means a lower long-term income is worth it. For others, scaling back travel plans would make more sense. Understanding the implications of your decisions can mean you make the choice that’s right for you.

It can also help you see how every day, smaller financial decisions can add up to provide you with more freedom in the future. For example, even a small increase in your pension contributions can mean you have the freedom to tick off bucket list items while still being financially secure.

Planning for the unexpected

Cashflow modelling doesn’t just help you answer questions when you’re deciding how to use your wealth; it can help you prepare for things that are outside of your control, too.

You may, for instance, worry about how your partner would cope financially if you passed away. Cashflow modelling can help you visualise this and show what steps you could take to provide security. This could mean taking out a life insurance policy or purchasing a joint annuity in retirement.

Alternatively, you may want to understand whether your retirement would still be on track if your investments didn’t deliver the expected returns. Or whether you could afford to pay for care in your later years.

These types of scenarios can be difficult to think about, but being proactive can provide peace of mind. By looking ahead, you’re in a better position to reach your goals and create financial security, even when the unexpected happens.

If you’d like to discuss how your decisions can affect your financial future, 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.