Spring 2021 Financial Focus Newsletter
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COVID-19 LESSONS ESG INVESTMENTS KEEP GROWING WHAT IS A MILLION WORTH? Financial takeaways from the pandemic Legislation catches up with sustainable In today's economy, what will £1 million buy? experience investment Financial FOCUS Tel: 01223 297060 l [email protected] SPRING 2021 The bridging Budget Budget 2021 brought tax freezes and a few surprises 2 Gita Kulinitch Studio/Shutterstock.com The need for financial advice In this issue... in a post-pandemic world As we start to move out of the lockdown cycle and slowly return to a ‘normal’ world, the need for people to take financial advice is greater than ever. Many A year after the Covid-19 pandemic took people will have suffered real financial hardship during lockdown and for hold, the careful and gradual moves out of lockdown are hopeful. The impact on the others, reduced expenditure means they may well be in a better position. economy, both short and long term, is yet Whatever your circumstances, now is an excellent time to review your financial to play out, but there are some planning planning. lessons for individuals that we can take from the last year. Some of these will be FAMILY PROTECTION affected by the spring Budget. Chancellor Rishi Sunak was under pressure to continue If you have changed jobs as a result of the pandemic, either by choice or by necessity, do you pandemic support measures, but has also still have enough financial protection in place for your family? A number of employers offer set out tax freezes to come which will ‘Death in Service’ schemes but the level of cover varies between employers so it is important begin to replenish the country’s coffers. to review whether this is enough or, as we are seeing increasingly, whether you should put in Meanwhile, families may well have focused place life or illness cover independently of your employment. on their financial well-being, including where they choose to invest. With environmental, social and governance (ESG) funds RETIREMENT PLANNING reporting significant increases, we look at Working from home has led many to question if they can afford to change their working how they have become more mainstream patterns or, in some cases, retire altogether. Retirement planning is a complex area, with in their cross-generational appeal. And for those focusing on retirement, while the state people facing a range of decisions as to how best to maintain their lifestyle in retirement. pension increases in line with the triple lock, Despite this, research has found that older generations are far less likely to speak with a we look at what £1 million is really worth financial adviser about their retirement plans; the survey, by Money Marketing, found that 51% long term. of people over the age of 65 had never taken any financial advice, with 57% of those saying this was because they could do it on their own1. 03 Lessons from the pandemic SAVINGS Financial planning tips for the future. The past twelve months have resulted in an excess income for many; with the lockdowns meaning we have not been able to socialise in our normal way, travel, or do the things we enjoy, some have found their expenditure is lower. Estimates suggest that as much as an 04 additional £100 billion has been saved into cash accounts as a result of the pandemic. Some Spring 2021 – the bridging Budget of this may be spent as we return to normality however, individuals should consider whether Threshold freezes signal stealth tax returning. or not some of this should be saved more tax-efficiently. Everyone in the UK has an annual ISA allowance, dividend allowance and Capital Gains Tax allowance. Working with an adviser to 05 create an individual financial plan means that investments could be made to maximise the use Company cars go electric of these allowances, which are otherwise lost. Tax breaks for electric cars mean soaring sales. Be it protecting your family, planning for your retirement, or general financial matters, it has never been more important to seek financial advice to make sure that you are on track to meet 06 your objectives. EBCam offers independent and impartial financial advice to individuals, their Intergenerational appeal of families and business, covering a wide range of areas including retirement planning, estate ESG investing planning, investments, protection and tax planning. We can provide advice on something Sustainability and governance go mainstream. as simple as your first ISA investment to more complex areas of financial planning including Inheritance Tax planning, or Shareholder/Key Person Protection for your business. 07 State pension rise still locked Sources: 1 - Money Marketing - Advice at Retirement Survey Triple lock moves pension growth above inflation but still lower than average wages. 08 The value of £1 million Behind the big numbers. Cover image: Ann in the Steve Heap/ Shutterstock This newsletter is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking any action on the basis of the contents of this publication. The newsletter represents our understanding of law and HM Revenue & Customs practice. © Copyright 15 March 2021. All rights reserved. 3 PLANNING What can we learn from the Covid-19 pandemic? As we pass the various one-year anniversaries around the Covid-19 pandemic, there are some useful lessons to draw for your financial planning. he past year has been difficult Investors who did not panic were rewarded The Financial Conduct Authority does not regulate for almost everyone – including with a recovery that saw some markets close will writing and some forms of estate planning. T the Chancellor. On 11 March 2020, 2020 with a value higher than the starting Rishi Sunak delivered his first point. That was not true for the UK, where the Budget, less than a month after becoming FTSE 100 declined by 14.3% over Chancellor. It included a set of “temporary, the year. However, from its timely and targeted” measures to address 23 March 2020 low to the end the impact of the then new coronavirus. On of the year, the FTSE 100 rose the same day, the World Health Organisation by 24.5%. declared Covid-19 to be a pandemic. In the months since, Mr Sunak has regularly returned YOUR RETIREMENT PLANS to the despatch box to announce further CAN SHIFT support schemes. The pandemic has had a major impact on working patterns, and by early May, If you take a step back, the pandemic nearly nine million jobs were covered experience has offered some important by the government’s furlough scheme. financial lessons. Research by the Institute for Fiscal Studies revealed how people also revised their THE VALUE OF AN UP-TO-DATE WILL retirement plans. One in eight workers Over half the adult population does not have aged 54 and over changed their planned a will, and Covid-19 had many scrambling to retirement age as a result of the pandemic, put something in place, or make changes to with most opting to retire later, not earlier. an existing will that was no longer relevant. The pandemic has served as a reminder This urgency came just as the practical that events, rather than personal choice, difficulties of will writing reached a peak, can determine a retirement date when finding solicitors open for business or meaning retirement plans need to arranging appropriate witnesses had become stay flexible. a major headache. Then the issue faded from the headlines with the easing of lockdown in B The value of your investment the summer and some temporary legislative and the income from it can go tweaks, but the importance of having an up-to- down as well as up and you date will remains. may not get back the full amount you invested. STAY CALM In the second half of February 2020, the Past performance world’s main investment markets started to is not a reliable react to the potential impact of Covid-19. indicator of future Then by about a month later, the value of performance. global shares had dropped sharply, with both the UK and US markets falling by about one Investing in third between 19 February and 23 March. Also shares should on 23 March Prime Minister Boris Johnson be regarded announced the start of the first lockdown, with as a long-term the immediate closure of some businesses. Any investment and investor who took fright at the Prime Minister’s should fit in with words and sold up hoping to cut their losses your overall would have chosen the worst time to quit the attitude to risk markets. and financial circumstances. eamesBot/ Shutterstock.com 4 TAX Spring Budget 2021 – the bridging Budget The first of two Budgets in 2021 signals larger tax bills in future years. nce upon a time, the concept PENSIONS of ‘Budget Purdah’ meant that The lifetime allowance for pension savings, The capital gains tax annual O very little of a Budget’s contents which started out in 2006 at £1,500,000, was trickled out before the day. Major frozen at £1,073,100 and will remain at that exempt amount was frozen leaks would prompt serious investigations level until April 2026. No changes were made for five years at £12,300. The and demands for resignations. The latest to the annual allowance. The possibility that November OTS report on CGT Budget underlined how that principle has been the Chancellor will reduce tax relief on pension reform was not mentioned. eroded. Despite extensive coverage ahead of contributions in his next Budget, due in the 3 March, some rumours proved true, others autumn, remains a real one.