Author: Talking Finances

Energy Saving Week is back from 17 January 2025. Throughout the week, the Energy Saving Trust will be working with organisations across the country to share tips on how you can reduce your energy bills and limit your carbon footprint.

If you’d like to take part, then keep reading to discover our best tips on how to boost your home’s energy efficiency this year.

More than 80% of homes built before 1930 are rated poorly for energy efficiency

A house’s energy efficiency is ranked on a scale from A (most energy efficient) to G (least efficient).

A government survey found that dwellings in England and Wales had a median energy efficiency rating in band D, and more than 80% of dwellings built before 1930 in England and Wales were rated in bands D to G.

Getting your home assessed for an Energy Performance Certificate (EPC) is one of the ways to know how energy efficient your house is, but chances are, there are at least a few improvements you could make to reduce your energy bill.

8 energy-saving tips to try in your home

If you want to reduce your energy bill or carbon footprint this year, read on to discover our eight top tips.

1. Switch off

One of the simplest tricks to reduce your energy consumption this winter is by turning appliances off when you aren’t using them.

Some common items you might want to switch off include:

• Kettle
• Lights
• Toaster
• Microwave
• Phone or laptop

Switching appliances off at the mains instead of leaving them in standby mode can help you reduce your amount of wasted energy.

2. Upgrade your appliances

Improving the energy efficiency of appliances you use frequently could help you cut down on your energy usage.

For example:

• LED bulbs use less energy than their halogen counterparts
• Cooking in an air fryer is cheaper than in an electric oven
• A heated drying rack uses less energy than an electric tumble dryer
• Replacing an inefficient shower head with a water-efficient one could save you money and water.

Switching out your appliances might only save you a few pounds each year, but that can add up quickly.

3. Update your heating controls

Your thermostat lets you set the desired temperature of your home, and once it reaches this temperature, it automatically turns the boiler off.

But many people fall for the common misconception that turning up your thermostat will heat your home faster when instead it is heating your home to a higher temperature at the same speed.

Setting a heating programmer to turn off the boiler while you aren’t home and to turn it back on 30 minutes before you usually return will ensure your house is always at a comfortable temperature as well as reduce your energy consumption.

4. Block draughts

One of the cheapest options for insulating your home is blocking any draughts that could be leaking heat into the atmosphere.

Applying draught-excluder strips to windows and filling in cracks in walls is inexpensive and relatively easy to do yourself.

If you have a fireplace you don’t use, it might also be worth investing around £65 in a chimney draught excluder.

5. Insulate your loft

Loft insulation is more expensive than draught excluders, but is one of the most cost-effective strategies for keeping your home warm.

Heat rises, so if your roof doesn’t have heat insulation, it can leak out into the cold atmosphere and waste energy.

Stone wool insulation costs around £10 per square metre and you can lay it down yourself like a blanket, so professionals aren’t necessarily required.

6.  Fix exposed pipes

If you live in an oil-heated home, uninsulated pipes may be losing heat that could be used to warm your home rather than being lost to the atmosphere.

Insulating these exposed pipes is thankfully not an expensive process but can help you save up to 25kg of carbon dioxide a year.

7. Try solar panels

Solar panels use energy from the sun, even on cloudy days, to make electricity which could then be used to power your appliances without affecting your energy bill.

Installing a typical solar panel system could help you save around £300 and 950kg of carbon dioxide per year. You could even install batteries that would allow you to store energy during the daytime to use in the evening.

8. Invest in a heat pump

A standard air-source heat pump could help you get back four times more energy than you put in. For comparison, a modern gas boiler loses around 8% of the energy you put in to make heat.

The installation of a heat pump usually costs around £14,000, but the UK government offers grants of £7,500 to help you offset costs. This makes a heat pump an excellent option if you’re planning to stay in your house long term, and might increase your property’s value if you decide to move.

When you’re making financial decisions, it can be difficult to look at your options objectively. Indeed, factors like your past experiences and emotions may influence the conclusions you draw.

Behavioural finance seeks to understand how people make financial decisions and what factors influence them. Understanding some aspects of this area of study could help you identify when you’re making choices that aren’t based on logic or facts.

Over the next few months, you can read about some of the different factors that could be affecting you. Now, read on to discover how habits and experiences could cloud your judgment.

Financial habits start forming in childhood

Your relationship with money might go back further than you think, and these early habits could still influence your decisions today.

In fact, a 2013 study published in the Telegraph suggests most children have formed financial habits by the time they’re seven. By this age, children often recognise the need to plan ahead with money and why you might delay decisions until a later day.

Money views that are reinforced while you’re young could go on to affect how you approach managing your finances in adulthood.

For example, a child who grows up in a household where money is scarce might develop a habit of frugality. While not overspending is positive, it could lead to a fear of spending that means they miss out on opportunities.

It might affect their long-term financial decisions too. A person who is worried about losing money might avoid investing or be overly cautious. So, their relationship with money could result in overlooked opportunities to grow their wealth over a long-term time frame, even when it’s appropriate for them.

Similarly, if you saw your parents making frequent impulsive purchases, you might be inclined to do the same.

It’s not just childhood where potentially harmful money habits are formed. The experiences you have as an adult could also influence your decisions.

Let’s say the first time you invest you lose some of your money. You might decide that investing isn’t right for you based on this outcome, even though the investment risk associated with new opportunities and your circumstances could be very different.

4 practical ways you could change your financial habits

The good news is that it’s possible to change financial habits and learn to recognise when past experiences are affecting your ability to weigh up options.

1. Have a clear financial vision

Being clear about what you want to achieve with your finances could help inform your decisions.

For example, if you’re focused on building a pension that will provide you with an income you can comfortably retire on, you might plan to invest your savings, so they have a chance to grow at a faster pace. Understanding why this is the right decision for you could mean you’re less likely to alter your investments, even if you’re fearful due to previous experiences.

2. Learn to spot when poor habits could affect you

Learning to recognise when you’re more likely to fall into negative habits may help you improve your financial behaviour. If you’re unsure where to start, keeping track of your financial decisions might be useful.

For instance, you may realise you’re more likely to overspend when you’re feeling low. You might then create a separate pot for your disposable income so your spending can’t affect other goals. Or if you note frequently checking the performance of your investments leaves you wanting to make adjustments, you may limit how often you review them.

3. Evaluate your decisions carefully

You’re more likely to fall into poor decision-making patterns if you rush. If you don’t have enough time to go through your options properly, using past experiences to decide provides a shortcut. However, it could mean you’re not making decisions based on all the information that’s available to you.

Where possible, give yourself more time to consider what’s right for you. While you might feel like you need to make a decision quickly, giving yourself some time could ultimately be more valuable.

Once you’ve made a decision, interrogating it can be useful as well – why have you come to that conclusion? What influenced your choice?

4. Get an outside perspective

It can sometimes be more difficult to spot your negative habits than it is in others. So, getting an outside perspective may be invaluable.

Simply having a conversation about your plans might highlight how previous experiences are influencing your decisions. Or the other person may be able to point out that you’re not acting in your best interests because you’re sticking to old habits.

As a financial planner, we could offer you an outside perspective and help you understand how a financial decision might affect both your short- and long-term finances.

Contact us to talk about your financial plan

As your financial planner, we might help you identify when habits and experiences could be leading you to make a decision that doesn’t align with your financial plan. If you’d like to review your finances or have any questions, please get in touch.

Next month, read our blog to find out how emotions may affect your financial decision-making skills.

Please note:

This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

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

Using allowances and exemptions could reduce your overall tax bill and help you get more out of your money. On 5 April 2025, the current tax year will end, and many tax-efficient allowances and exemptions will reset. So, here are five that you may want to consider using before the 2025/26 tax year starts.

1. ISA allowance

ISAs provide a popular way to tax-efficiently save and invest. Indeed, the latest government figures show in 2022/23, 12.4 million ISAs were subscribed to with around £71.6 billion being collectively added to accounts.

For the 2024/25 tax year, you can add up to £20,000 to ISAs. If you hold money in a Cash ISA, the interest you receive wouldn’t be liable for Income Tax. Similarly, if you invest through a Stocks and Shares ISA, any returns generated aren’t liable for Capital Gains Tax (CGT).

If you don’t use your ISA allowance before the tax year ends, you’ll lose it. So, it could be worthwhile reviewing your saving and investing goals now.

Before you place money into an ISA, it’s often a good idea to consider your goal. For short-term goals, a Cash ISA might be suitable for your needs. On the other hand, if you’re putting money away for a goal that’s more than five years away, you may want to consider if you could benefit from investing.

In addition, if you’re aged between 18 and 39, you could open a Lifetime ISA (LISA). In the 2024/25 tax year, you can add up to £4,000 to a LISA and receive a 25% government bonus. The £4,000 LISA allowance counts towards your overall £20,000 ISA allowance.

However, if you withdraw money from a LISA before the age of 60 for a purpose other than buying your first home, you’d pay a 25% penalty. As a result, a LISA is often most suitable for those saving to get on the property ladder.

2. Dividend Allowance

If you’re a business owner or hold shares in some companies, you might receive dividends.

You don’t pay tax on dividends that fall within your Personal Allowance, which is £12,570 in 2024/25. In addition, you can receive up to £500 in dividends before Dividend Tax is due under your Dividend Allowance. So, dividends could offer a valuable way to boost your income without increasing your tax liability.

You cannot carry forward unused Dividend Allowance.

Even if your dividends could exceed the allowance, the tax rate you pay could be lower than receiving a comparable amount that was liable for Income Tax. The rate of Dividend Tax you pay depends on your Income Tax band. In 2024/25, the rates are:

• Basic rate: 8.75%
• Higher rate: 33.75%
• Additional rate: 39.35%

So, making dividends part of your financial plan could reduce your overall tax bill even if you’re liable for Dividend Tax.

3. Capital Gains Tax Annual Exempt Amount

Chancellor Rachel Reeves made several changes to CGT in the Autumn Budget, including increasing the main rates. Consequently, you could find your tax liability is higher than expected when you make a profit when you dispose of some assets.

Indeed, the Office for Budget Responsibility estimates CGT could raise £15.2 billion in 2024/25, which may then increase to £23.5 billion in 2028/29.

From 30 October 2024, the standard rates of CGT are:

• 24% if you’re a higher- or additional-rate taxpayer
• 18% if you’re a basic-rate taxpayer and the gains fall within the basic-rate Income Tax band.

Importantly, the Annual Exempt Amount means you can make profits of up to £3,000 in 2024/25 before CGT is due. So, if you plan to dispose of assets, timing the decision to make use of this exemption could be valuable.

You cannot carry forward the Annual Exempt Amount into the new tax year if you don’t use it.

4. Pension Annual Allowance

Pensions provide a tax-efficient way to save for your retirement as contributions benefit from tax relief and the interest or investment returns generated are tax-free.

In 2024/25, the Pension Annual Allowance is £60,000 – this is the amount you can tax-efficiently add to your pension in a single tax year, so you might also need to consider employer contributions and those made by other third parties. However, you can only claim tax relief on up to 100% of your annual earnings, or £2,880 if you’re a non-taxpayer.

There are two reasons why your Annual Allowance may be lower.

• If your adjusted income is more than £260,000 and your threshold income is more than £200,000, the allowance will taper. For every £2 your income exceeds the adjusted income threshold, your Annual Allowance will fall by £1. The tapering stops at £360,000, so everyone retains an allowance of £10,000.
• If you’ve already flexibly accessed your pension, the Money Purchase Annual Allowance may affect you. This reduces the amount you can tax-efficiently add to your pension to £10,000.

You can carry your Annual Allowance forward for up to three tax years. So, you have until 5 April 2025 to use any unused allowance from 2021/22.

5. Inheritance Tax annual exemption

Government figures suggest Inheritance Tax (IHT) bills are on the rise. Indeed, IHT tax receipts between April 2024 and October 2024 were £5 billion – around £500 million higher than the same period last year.

If your estate could be liable for IHT when you die, passing on wealth during your lifetime could be a valuable way to reduce a potential bill.

However, not all gifts are considered immediately outside of your estate for IHT purposes. Some may be included in your estate for up to seven years, which are known as “potentially exempt transfers”.

So, using allowances and exemptions that enable you to pass gifts to your loved ones without worrying about IHT might be an important part of your estate plan.

In 2024/25, the annual exemption means you can pass on £3,000 without worrying about IHT. You can carry forward your annual gifting exemption from the previous tax year, so you could gift up to £6,000 in a single tax year and have it fall immediately outside your estate.

There are often other allowances or ways you could reduce your estate’s potential IHT bill. Please contact us to talk about steps you may take.

Get in touch to discuss your end-of-year tax plan

If you’d like to talk about which allowances and exemptions you may want to use to reduce your tax bill in 2024/25, please get in touch. We’ll work with you to help you understand which steps could be right for your circumstances and aspirations.

Please note:

This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

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

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

The Financial Conduct Authority does not regulate tax planning, Inheritance Tax planning, or estate planning.

While the saying might be “money can’t buy happiness”, research suggests that financial stability certainly plays a role in your overall wellbeing. In retirement, when you’re no longer earning a salary, finding a way to create financial stability could be a vital part of building a lifestyle that allows you to enjoy the next stage of your life.

Legal & General and the Happiness Research Institute carried out a study to uncover what makes people happiest in retirement.

The happiest respondents enjoyed good health and satisfying close relationships. They also valued their independence and filled their time with meaningful activities. Together, these factors may help you create a retirement that supports your wellbeing.

Underpinning these components was a consistent key factor – a predictable income.

Interestingly, retirees often didn’t need a large income, but feeling financially secure was important. Indeed, the research found that a stable income of £1,700 a month for an individual supported happiness. The boost of a higher income started to level off once it reached around £2,000 a month.

Over the last few years many households, including retirees, have had to adjust their spending as high inflation has led to higher outgoings. So, it’s perhaps unsurprising that financial stability is valued.

In addition, changes to how you can access your pension in 2015 have offered greater flexibility to retirees. While many welcomed Pension Freedoms, they also added a layer of complexity and may mean some retirees no longer receive a reliable income from their pension savings.

3 types of retirement income that are reliable

The research found that many retirees were concerned about their financial security, and 27% said their finances are often or sometimes unpredictable or difficult to keep track of.

So, understanding what income is reliable and whether it could meet your essential outgoings might offer peace of mind. Here are three types of dependable income you might receive once you retire.

1. State Pension

The State Pension often provides a foundation to build your retirement income on. It’s valuable for two key reasons:

• It provides a regular income you can rely on.
• Under the triple lock, it increases each tax year, which helps to preserve your spending power.

The full new State Pension would provide an income of £221.20 a week, or around £11,500 a year, in 2024/25. However, the amount you receive will depend on your National Insurance (NI) record and when you reach State Pension Age.

Usually, under the new State Pension rules, you’ll need at least 35 qualifying years to receive the full amount. You can use the government’s State Pension forecast to understand how much you could receive and whether you’d benefit from filling in NI gaps.

One potential issue to note is that you may plan to retire before State Pension Age. The State Pension Age is currently 66 for both men and women and it’s set to rise to 67 between 2026 and 2028. The government could announce further increases in the future too.

So, you might need to take a higher income from other assets before you reach State Pension Age to bridge the gap.

2. Defined benefit pension

If you have a defined benefit (DB) pension, also known as a “final salary pension”, it’ll pay you a regular income from when you reach the retirement date until you pass away.

How the amount of income it provides is calculated varies between pension schemes. However, it’s usually linked to the number of years you paid into the scheme and your salary.

In many cases, the income provided will rise in line with inflation and the scheme would provide an income for your partner if you pass away first.

3. Annuity

If you have a defined contribution (DC) pension, you’ll often be able to access your savings when you reach the normal minimum pension age, which is 55 (rising to 57 in 2028).

One of the options you have with a DC pension is to purchase an annuity. An annuity would provide you with an income for the rest of your life or a defined period, and might help to create financial stability in retirement.

You may choose an annuity that will rise in line with inflation or would provide an income for your partner if you passed away first.

A flexible income could also provide you with financial security in retirement

With a DC pension, there are other ways to create a retirement income too. While these options might not provide a reliable income, they could still offer a sense of financial security and might better suit your needs.

For instance, you may choose flexi-access drawdown. With this option, your pension would typically remain invested and you withdraw an income, which you can adjust. This might be useful if your income needs could change throughout retirement.

Understanding the potential long-term effect of your withdrawals, and calculating what a sustainable withdrawal rate looks like for you, could help you feel confident in your finances even if you choose a flexible income.

Contact us to talk about how you could create financial stability in retirement

Most retirees will receive an income from several different sources. For example, you might benefit from a reliable income from the State Pension and a DB pension, which you supplement with a flexible income from a DC pension.

Juggling these different income streams can be confusing and might mean you’re worried about your finances, even when you’re in a good position. A financial plan could help you understand which options are right for you and give you confidence in the future, so you’re able to enjoy a happy retirement.

Please contact us if you’d like to arrange a meeting with our team.

Please note:

This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

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

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

While you might have similar goals or circumstances to other people, a financial plan isn’t a one-size-fits-all solution. Instead, a tailored financial plan that considers your needs and goals could help you get far more out of it.

For instance, one goal might be to ensure you’re financially secure in retirement. It’s likely to be something many other people are working towards too, but that doesn’t mean your retirement goals are the same. There could be many differences, which may affect how much you need to save. For example:

• What age would you like to retire?
• Are you entitled to the full State Pension?
• Will you be retirement planning with a partner?
• What kind of retirement lifestyle are you looking forward to?
• Do you have a defined benefit pension that will provide a reliable income?
• Will you be financially supporting dependents or other loved ones during your retirement?

So, even if you’re working in a similar position and are hoping to retire at the same time as a colleague, the amount of income you need in retirement could be vastly different.

A tailored financial plan could help you understand your finances so you’re in a better position to make decisions that are right for you. Here are three compelling reasons why a tailored financial plan could benefit you.

A bespoke financial plan will understand your circumstances

Different circumstances and priorities could mean your financial situation is very different from another person’s, even when you have broadly the same income.

As a result, basing your financial decisions on what other people are doing, rather than tailoring them to you, could mean you make choices that aren’t right for your circumstances.

For instance, a friend may tell you that it’s too risky to invest and that saving is a better option. This might be the case for them. Perhaps they don’t have an emergency fund and are choosing to build that up first, or are saving for a short-term goal so investing would be inappropriate. However, it doesn’t mean that investing couldn’t be right for you.

Reviewing your options with your financial position in mind could help you balance potential risks and make decisions that are right for you.

Your goals will form the heart of your financial plan

While understanding your financial situation is an important part of creating an effective long-term plan, just as crucial are your goals – what do you want to use your wealth for?

Once again, everyone is on their own path, so if you made financial decisions based on the aspirations of another, it could mean you miss out on opportunities to turn your goals into a reality.

For example, someone who wants to retire early might increase their pension contributions so they’re able to achieve a sustainable income once they stop work. Putting extra money aside for retirement might seem sensible, but that may not align with your aspirations. If your focus is to give your children a helping hand when they reach adulthood, you might contribute to a Junior ISA instead, or if you dream of setting up your own business, you may want to use some of your wealth to invest in it.

An effective financial plan is about understanding how your income and assets could be used to help you live the life you want, so tailoring it to your goals is essential.

A tailored financial plan could ease your fears

It’s not just your goals that a financial plan could help you manage, but your fears too.

Finances can seem complex, especially when you’re working towards goals that might be decades away. You may need to consider areas like investment risk, the effects of inflation, or how you’d cope if your income unexpectedly stopped. So, it’s not surprising that you might feel nervous when you look at your finances and consider the future.

A financial plan could help you address the fears that are worrying you. For instance, if you’re concerned you could lose your job, a financial plan might demonstrate how you could use your other assets to create an income stream if you need to.

Alternatively, if you have a family, you might be worried about how they’d cope financially if you passed away, so you may decide that life insurance could offer you peace of mind.

In this way, a financial plan could help you manage your fears so you’re better able to focus on enjoying your life today.

Contact us to talk about your tailored financial plan

If you’d like to create a financial plan that’s tailored to your aspirations, worries, and financial circumstances, please contact us. As financial planners, we’ll work with you to build a plan that could help you reach your goals in the short and long term. Please contact us to arrange a meeting.

Please note:

This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

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

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

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

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