Guide: Your complete 2021/22 end of tax year guide

The 2021/22 tax year ends on Monday 5 April 2022. This is the date when many allowances reset, and it could be your last opportunity to make use of some of them.

Keeping track of how you’ve used your allowances can reduce your tax liability and help you boost your wealth. Reviewing your finances ahead of the tax year end could reduce the amount of tax you pay and improve your financial security in the future.

This guide covers seven allowances and exemptions you should consider making use of to ensure you’re ready for the new tax year:

  1. ISA allowance
  2. Marriage Allowance
  3. Pension Annual Allowance
  4. Dividend Allowance
  5. Capital Gains Tax annual exempt allowance
  6. Inheritance Tax annual exemption
  7. Gifts from your income.

Download your complete 2021/22 end of tax year guide to learn more about these allowances and exemptions. If you’d like help preparing for the end of the tax year, please contact us.

7 positive habits that could improve your wellbeing

A woman holding a cup of coffee overlooking a green landscapeAs we head into a new year, it’s common to think about the changes you could make to your life to improve your wellbeing and reach your goals. Taking steps to instil positive habits at the start of 2022 could set you up for greater wellbeing in the long term.

If you’re thinking about making a resolution this year, listing your priorities now and in the future can help give you some direction and lead to a habit that will have a long-lasting impact. Here are seven positive habits that could help you, whatever your goals are.

1. Create a routine and stick to it

Your daily routine can help improve your mental wellbeing. From setting a regular bedtime to eating at the same time every day, a consistent routine can reduce stress and help you focus on the important things. Finding a routine that works for you and your lifestyle could deliver a health boost.

A routine is also a good way to instil other habits that you may want to adopt. If you want to improve playing an instrument or learn a new craft, carving out a dedicated time each day or week to focus on this can help ensure you give these goals your full attention.

2. Think about what makes you happy

What makes you happy or gives your life purpose?

Regularly spending time thinking about what is important for you can help you make decisions that will lead to a lifestyle that brings your more joy. Yet, it’s something that many people don’t do. According to an Aegon report, only 4 in 10 people think about what gives their life joy.

It can be as simple as thinking about what you’ve enjoyed the most in the last week or what you’re looking forward to, but it’s a habit that can improve your mindset. Making a habit of doing this can help steer decisions to those that will make you happier and give you clear priorities when you think about the future.

3. Increase your physical activity

When your body is healthy, your mental health improves too. Physical activity is an excellent positive habit to adopt that can mean you’re able to make the most of your life. Not only will it improve your physical health, which can help keep you active and independent later in life, but it can reduce stress and leave you feeling happier.

Making exercising, from a brisk walk to swimming, part of your routine is a great way to improve wellbeing.

4. Get outdoors more

Being outdoors can make you happier and healthier, especially if you head to a place filled with nature.

Being surrounded by trees or other natural sights has been found to lower blood pressure and stress. It can instantly boost your mood and improve your focus too. A habit of going for a walk through your local park, or visiting national parks and nature reserves in your free time can improve your mental health and provide a chance to exercise outdoors.

5. Embrace mindfulness

Modern life can be stressful and mean it’s difficult to focus on the present. If you find that your mind wanders to other tasks or plans instead of enjoying the present moment, mindfulness can be a useful practice.

Mindfulness is a type of meditation where you focus on what you’re feeling in the moment. It aims to relax the body and minimise stress. It can help you recognise how emotions are driving behaviours and it can help you make positive changes to your life. Just five minutes a day to practice mindfulness can boost your mental wellbeing.

6. Make time to spend with people

Setting out time to spend with other people can be hugely rewarding.

That may be time to focus on your family and friends or to find opportunities to meet new people. Socialising is good for a variety of reasons. It can not only stave off the feeling of loneliness and boost happiness, but it can help improve memory and cognitive skills. Making an effort to meet up with people physically or stay in touch digitally can make your life richer.

7. Make a long-term plan

Don’t just focus on the changes that could improve your life now, but look at what you want to achieve in the future. It can mean you’re able to look forward to the things you plan to do and relieve the worries you may have. Setting out what life you want to lead in 10 or more years can put you in control.

Despite the benefits, just 1 in 3 people have a concrete idea of their future self, according to the Aegon report. Just 13% of people have a plan to reach money goals that could help them achieve their aims. While you may have a vague idea about what you want your future to be like, a concrete plan means you’re far more likely to reach these goals.

This is something financial planning can help you with. We’re here to help you think about your long-term lifestyle goals and the steps you can take now to ensure you have the financial means to reach them. Please contact us to arrange a meeting.

Greenwashing: What does it mean when investing?

Woodlands in springtimeThere is a growing interest in investments that are “sustainable” or “green”. Yet, it can be difficult to spot which investment opportunities will have a real impact, and research shows investors are increasingly sceptical about “greenwashing”.

Greenwashing is when companies or funds give a false impression or provide misleading information about how environmentally friendly they are. These claims may be partly true but are exaggerated in an attempt to mislead consumers and investors. If you want your investments to reflect a greener lifestyle, it can make it difficult to understand which investments fit this criterion.

26% of investors are sceptical about green and ethical investments

Research from Triodos Bank shows that investors are increasingly worried about greenwashing.

In 2020, 17% of investors that don’t currently invest in an ethical fund question how many investments that make claims to consider the environmental and social impact are truly ethical. In 2021, this figure has increased to 26%.

With confusion over the true impact and credentials of these types of investments, it’s not surprising that investors want more transparency. 7 in 10 consumers want more knowledge about where their money is invested, while 8 in 10 also believe all banks and financial providers should be more transparent about how they use people’s money.

At the moment, 54% of consumers believe providers aren’t helpful when it comes to revealing how their money is invested.

It’s not just consumers that are worried about greenwashing either; Schroders’ Institutional Investor Study found that greenwashing was one of the biggest challenges investors face. Almost 6 in 10 investors globally said they were worried due to the lack of clear, agreed definitions on what sustainable investment is.

If you want your investments to have a positive impact on the environment or other green areas, greenwashing can be a worry. The Financial Conduct Authority has issued a warning over industry attempts at greenwashing and has plans to regulate firms providing sustainability data and regulations. But for now, investors will need to consider whether greenwashing could be affecting their choices.

How to spot greenwashing

Review company plans and sustainability reports

If choosing greener investments is important to you, carrying out your own research is a must.

While an investment may refer to themselves as “green” or other buzzwords, remember that there’s not yet an agreed definition for this concept. What you consider to be “green” could be very different from someone else’s criteria, especially when they’re trying to encourage investors.

If you’re investing in individual company stocks, you may want to review their sustainability report and whether future projects align with sustainability goals. Reviewing these materials isn’t a failsafe way to invest in a company with strong green credentials – there’s still a chance they could be promising more than they can deliver – but it can help you spot greenwashing.

Check where a fund is invested

A fund is a way of investing money alongside other investors in a range of businesses. There are now many options that claim to be “green”, “sustainable”, or “responsible” for conscious investors to choose from. However, once again, with no set definition it can be difficult to assess the impact your money will have.

One of the steps you can take is to review the companies the fund invests in. This could include checking the fund allocation percentage for each industry or looking at the list of companies, which you’ll usually find in their prospectus.

According to the Triodos research, this is one of the most common steps investors are taking. Three-quarters of investors new to green investments closely scrutinise the full list of companies their funds invest in. You may be surprised by what you find – few funds, for example, exclude fossil fuels entirely.

Speak to your financial planner

Researching your investment can be time-consuming and may be filled with jargon. If you’re worried about the impact greenwashing could have on your investments, we’re here to help. We can help you wade through the information and discuss what approach you want to take to sustainable investing, as there is no one-size-fits-all solution.

There are many ways to incorporate sustainable objectives into your investment portfolio while balancing this with your goals and risk profile. Please contact us to talk about your investment portfolio.

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

Do you have realistic investment expectations?

A man pointing to a screen showing data on a chartWhen you invest, how much do you expect to receive in return? A survey suggests that some investors have unrealistic expectations that could affect their long-term financial security.

Research from Aegon found that half of UK adults have put money into investments because interest rates are low. While this can be a positive step for long-term financial security, it’s important to understand the risks and potential returns.

Of those that decided to invest, 35% said interest rates falling to between 1 – 2% was the tipping point, and a further 39% said it was when interest rates fell below 1%.

Before you decide to invest, it’s important to make sure it’s the right decision for you. Here are three things you should consider first:

  1. What is your goal? Investments experience volatility and their value will rise and fall. In most cases, you should only invest with a minimum time frame of five years to allow the peaks and troughs to smooth out.
  2. Do you have an emergency fund? Ideally, you should retain some of your savings in an accessible account for emergencies. Worryingly, 10% of people said they had invested all their extra cash, which could leave them financially vulnerable
  3. Do you understand investment risk? All investments will have some level of risk, so you should consider what would happen if the value of your investments were to fall.

If you decide to invest, you should look at what your expectations are.

What are realistic investment expectations?

Investment returns cannot be guaranteed, and the potential returns will vary depending on the investment.

As a general rule of thumb, the more investment risk you take, the higher the potential returns. However, this doesn’t mean you should automatically invest in these kinds of investments. High-risk investments are unlikely to be suitable for the majority of investors, even when the potential returns are high.

What is realistic in terms of expectations will very much depend on the investments you choose.

According to Credit Suisse’s Global Investment Returns Yearbook 2021, over the last 40 years, returns from world equities have been 6.8% a year. In contrast, the Aegon survey found that it’s only when an investment promises a return of 10% or more that the majority of investors become sceptical. The findings suggest that some investors expect returns that are much higher than average.

The dangers of unrealistic investment expectations

Your investments not meeting your expectations can be disappointing, but it could have larger consequences too.

1. It could affect other financial and lifestyle decisions

Financial decisions not meeting your expectations can have a serious impact on your goals. If you were expecting investments to deliver a 10% return, you may have planned to retire early, for instance. Or you may increase your spending in light of this expectation.

Unrealistic expectations can mean you make additional decisions based on this information that are not right for you. To create a reliable financial plan, you need to work with information that is as accurate as possible. That means including investments returns that are realistic.

2. It may leave you vulnerable to scams

One of the signs of a scam is unrealistic investment returns. However, if your expectations are skewed, you may not spot a scam until it’s too late. The research found that just 35% of investors would avoid opportunities that promised high returns. Worryingly, 5% admitted they are less concerned about safety, and always look at investments offering the best returns.

In most cases, money lost to scams cannot be recovered. Taking your time to review investments is important. Keep in mind that investment returns cannot be guaranteed and if it sounds too good to be true, it probably is.

How financial planning can you manage investment expectations

Whether you’re new to investing or have built up a portfolio over the years, getting a second opinion can help. We can demonstrate how different investment outcomes would affect your wealth and help you create long-term plans that give you confidence in the future. We’ll help you understand what you can expect from your investments, and what opportunities may be right for you.

Please give us a call if you’d like to talk about investing and how to make it part of your wider financial plan.

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.

The pension gap: Life expectancy means women need to save more for retirement

A young woman sitting at a desk with a laptop and paperworkThe pension gap between men and women is closing. But, once life expectancy is taken into consideration, women still need to save an extra £185,000 for retirement, on average, according to the Scottish Widows 2021 Women and Retirement report.

The report finds that young women in their 20s today can expect to have around £250,000 in their pension by the time they retire. For men, the figure is £100,000 higher at £350,000. On top of this, women are expected to live for longer and pay for the associated care costs of this, so they need to add a further £85,000 to be financially secure throughout retirement.

To reach this goal, women in their mid-20s today will need to save an extra £2,500 each year, or £210 a month, until they retire.

Jackie Leiper, managing director of workplace savings at Scottish Widows, said: “It’s well known that the gender pay gap has a damaging affect on women’s retirement prospects. But women face a double whammy: even if we close the pension savings gap, pension equality would still not be achieved, because women need to fund a longer retirement and spend more on associated care costs.”

One of the reasons highlighted for the pension gap is the gender pay gap. The median salary for a man is £31,400, for a woman, it’s £20,500. It means even if men and women contribute the same portion of their salary to a pension, women are much more likely to face financial insecurity in retirement. Taking control of your pension before you retire can help you achieve long-term goals and have confidence.

3 things women can do to improve their financial security in retirement

1. Don’t forget about your pension when taking a career break

One of the reasons women have smaller pension pots on average is because they’re more likely to take a career break. Whether to raise a family, care for elderly relatives, or another reason, this can affect your retirement plans.

It can be easy for pensions to slip your mind when you’re not working, as contributions will often be automatically deducted from your paycheque. But this doesn’t mean you have to stop adding to your pension when you’re not at work. You won’t benefit from employer contributions, but you will still receive tax relief to deliver a boost to the money you put in.

You can add pension contributions to suit you. This could mean setting up a direct debit to take a specified amount regularly or adding one-off sums when you can. This flexibility means you can stop and start pension contributions depending on your circumstances.

2. Boost your current pension contributions

The report also measures the proportion of men and women that are deemed to be saving adequately for their retirement. This is defined as those saving a minimum of 12% of their pensionable earnings into a pension. This figure compares to the minimum auto-enrolment contribution of 8%.

The good news is that the gap between men and women saving adequately for retirement has closed. 6 in 10 men and women are now found to be saving enough for a comfortable retirement. Yet, that means 4 in 10 could still face financial struggles when they retire.

If you have the means to do so, even a small increase in regular pension contributions can have a large impact. These contributions will benefit from tax relief and be invested with the goal of delivering long-term growth. Over a career, the effect of compounding means your pension contributions can grow significantly.

3. Have a clear target for your pension

While the report gives an idea of how much women need to save for retirement, it can vary a lot for different people. If you’re still working, retirement can seem like a long way off, but thinking about your plans now can help you set a clear target and give you confidence that you’re on track. Answering questions like the below can help build an accurate pension target that’s right for you.

  • At what age would you like to retire?
  • Do you want to transition into retirement?
  • What kind of retirement lifestyle would you like?
  • What will your financial commitments be?

By taking this information, along with areas like life expectancy and expected investment growth into consideration, you can better understand if the steps you’re taking now will mean you can reach your retirement goals.

Getting to grips with your pension can be challenging. If you’re not sure where to start, we’re here to help you. Whether you’re still working or are ready to retire, we can offer advice and guidance to help you make the most of your pension contributions.

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

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

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.

5 retirement challenges you could face and what to do about them

Senior couple walking through the park and pushing a bikeWhether retirement is over a decade away or just around the corner, you could face significant challenges that may affect the lifestyle you want. Learning more about these potential obstacles and taking steps to reduce their impact now could make heading into retirement smoother.

Almost half of people see retirement as a time of financial freedom

The Great British Retirement Survey from interactive investor found that 45% of people who have yet to retire view this chapter of their life as a time for financial freedom. Without work commitments, retirement can provide you with the space to focus on the things you enjoy. Achieving financial freedom can provide peace of mind so you’re able to embrace the lifestyle you want.

When asked what they hope to spend retirement doing, travel came out top. 3 in 10 (29%) of respondents said travelling more was their top priority when they retired. Using retirement as an opportunity to spend time developing a new business or hobby was popular too. 42% of people yet to retire are looking forward to this.

While you may be optimistically thinking about a time when you don’t have to go to work, reaching your retirement goals requires careful planning. There are challenges those approaching retirement could face, and they may derail your goals. Here are five challenges modern retirees need to think about to create a secure future.

1. Managing multiple pensions

Gone are the days when employees would stay at the same company for decades. Today, it’s far more common to frequently switch jobs to learn new skills and seize opportunities. The downside to this is that you can end up with multiple pensions. This can make it difficult to assess if you’re on track, and when you consider their various charges and investment performance, you could be missing out.

The Great British Retirement Survey found that 66% of people yet to retire have more than one pension, and 15% have four or more. Worryingly, 6% don’t know how many pensions they have. Keeping track of where your retirement savings are is important, as it can be easy to “lose” them. In some cases, consolidating your pension can make retirement planning simpler.

The challenge of multiple pensions is set to increase. Auto-enrolment means most employees will now benefit from a workplace pension. So, it can be easy to accumulate many different pots throughout your working life.

2. Deciding how to access your pension

How you access your pension has become more complicated. Previous generations would usually have a final salary pension or purchase an annuity to deliver a reliable income for the rest of their life.

This changed in 2015 when the government introduced Pension Freedoms. Under the new rules, you can still purchase an annuity, but you can also take a flexible income through drawdown or withdraw lump sums if you have a defined contribution (DC) pension. These changes provide more flexibility, but they also mean retirees have more responsibility and need to understand the pros and cons of each option.

Despite the complexities of this, just 27% of retired people in the survey worked with a financial planner. Those deciding how to access their pension were far more likely to rely on their own research (64%) or read the financial press (42%). While these steps can be useful, they can mean you miss vital pieces of information, and it can be difficult to understand how the options relate to your circumstances.

3. Running out of money

How long do your retirement savings need to last? Retirement can last for decades, and it can make it difficult to arrange your finances to deliver the income you need. It’s why 41% of workers worry about running out of money. Almost 3 in 10 (27%) retirees are still worried they don’t have enough to last their lifetime.

A financial plan can provide you with confidence about your long-term finances, even if you decide to take a flexible income.

4. Being affected by stock market volatility

If you decide to access your pension through drawdown, your savings will usually remain invested. This means your pension will remain exposed to market volatility. You may also have investments outside of your pension that you will use in retirement.

After the sharp market dip at the start of the Covid-19 pandemic, almost half of both workers and retirees list market falls in their top-three financial concerns. Market falls can mean your assets are worth less, but keep in mind that over the long-term, markets have historically recovered.

When you retire, having a financial buffer in cash can help reduce the impact of market volatility. Several months’ worth of expenses in an accessible account means you won’t have to withdraw from your pension amid short-term volatility. When investment values fall you have to sell more units to achieve the same level of income. Having cash to fall back on can help preserve your pension for the long term.

5. The rising cost of living

Inflation has been big news recently, so it’s not surprising that 42% of those that haven’t retired yet rate it highly among their concerns.

The Bank of England has an inflation target of 2% a year. However, due to Covid-19 and supply shortages, inflation in the 12 months to September 2021 was 3.1%. The central bank has said inflation could reach 4% in the coming months. Higher levels of inflation mean that day-to-day and luxury costs are likely rising for households.

When making a retirement plan, you need to consider inflation and how it could affect your spending power. Over a retirement that could span decades, inflation can have a significant impact. There are several ways you can consider inflation when putting together your retirement plan. This may include leaving some of your pension invested with the aim of delivering returns that keep pace with or outstrips inflation. Or you may purchase an inflation-linked annuity to maintain your spending power.

Effective retirement planning can help you highlight challenges and put in place a plan that means you can overcome them and focus on what’s really important to you in retirement. If you’d like to talk about your retirement and the steps you can take to create financial freedom, 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 not normally accessible until 55 (57 from April 2028). The value of your investments (and any income from them) can go down as well as up, 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. Levels, bases of and reliefs from taxation may change in subsequent Finance Acts.