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Chancellor Rishi Sunak has unveiled the government’s spending plans for the coming year in his Spending Review given on Wednesday 25 November.

A Spending Review sets out how the government plans to spend money and what each department will receive. It covers a range of areas, like health, policing, and education. It also covers public sector pay and money for the devolved administrations of Scotland, Wales, and Northern Ireland.

Usually, a Spending Review will cover several financial years, allowing the government and departments to plan. However, Rishi Sunak set out spending plans for the 2021/2022 tax year only due to the economic uncertainty caused by the Covid-19 pandemic.

Covid-19 impact: Economy predicted to contract by 11.3% this year

The Spending Review was delivered against a backdrop of challenges. The Office for Budget Responsibility (OBR) predicts the government will borrow £394 billion in 2020/21, far higher than in previous years as a result of the pandemic.

This figure represents around a fifth of UK GDP and means borrowing is at its highest levels in peacetime history. While the Chancellor committed to supporting Covid-19 support schemes, he notes that this level of borrowing is unsustainable in the medium term.

Economic forecasts from the OBR also paint a gloomy picture. The economy is forecast to contract by 11.3% this year, the largest fall in output for 300 years. While the economy is expected to grow by 5.5% next year and 6.6% in 2022, Rishi Sunak said the economic damage would be lasting. Output is not expected to return to pre-crisis levels until the fourth quarter of 2022.

Due to the economic challenges, the OBR predicts unemployment will reach a peak of 7.5% in the second quarter of 2021.

Rishi Sunak described the economic emergency as ‘only just beginning’. He added the immediate priority was to protect people and livelihoods, but the Spending Review also delivers ‘stronger public services’ and a ‘once in a generation investment in infrastructure’.

Covid-19 response

Unsurprisingly, the cost of responding to the Covid-19 crisis was top of the agenda. The government is providing £280 billion to get the country through Covid-19, the Chancellor said.

Next year, he has set aside an initial £18 billion to spend on testing, PPE, and vaccines.

Public sector pay

Rishi Sunak argues that, compared to private sector workers, public sector employees have benefited from higher pay rises and more security during the crisis. As a result, he said he cannot justify across the board pay increases.

One million nurses, doctors, and other NHS employees will receive a pay rise. Other public sector workers that earn below a median wage of £24,000 (around 2.1 million people) will receive a guaranteed pay rise of at least £250. All other public sector employees will have pay rises paused next year.

National living wage

Around two million people will benefit from a 2.2% national living wage increase, taking this to £8.91 per hour. The increase will apply to all workers over the age of 23, as previously the national living wage was only available to those aged 25 and over.

Overseas aid

Sunak confirmed claims that the UK will abandon the 0.7% overseas aid target and spend 0.5% of national income on aid next year. This will amount to £10 billion.

The Chancellor argued that spending so much on international aid is difficult to justify while borrowing is so high. The government plans to return to the 0.7% target once borrowing is lower.

Departmental spending

Total departmental spending will increase by 3.8% in real terms, the fastest growth rate in 15 years. Headline announcements for departmental spending include:

• The NHS benefiting from an extra £3 billion
• £1 billion is also allocated to tackle treatment backlogs and enable delayed operations to go ahead
• £300 million extra grant funding for councils for social care
• A multi-billion pound increase in annual defence spending over the next four years, creating 40,000 jobs
• An extra £2.2 billion for schools
• A new £4.6 billion package to help people get back to work
• £2 billion extra for public transport, including subsidies for the rail network
• £4 billion over four years to provide 18,000 new prison places.

Infrastructure and ‘levelling up’

Investment in infrastructure will total £100 billion next year, with plans to deliver the highest sustained investment in four decades. This is supported by plans to launch a new infrastructure bank, which will be based in the north of England.

The Chancellor also announced a ‘levelling up’ fund of £4 billion. Local areas can bid for the funding to support local projects.

Questions?

Please contact us if you have any questions about the Spending Review and what it means for you.

At some point in our lives, most of us will need to take out a mortgage if we aspire to own a home. Yet, mortgages and the process of securing one can still be filled with jargon and other complexities. Our guide aims to provide you with all the information you need when searching for a mortgage, whether as a first-time buyer or you’re hoping to move up the ladder.

In the guide you’ll find information on:

• Deposits and LTV ratios
• The different types of mortgages available
• Why interest rates are important when selecting a mortgage
• Other factors you should consider when choosing a mortgage

Click here to download your copy of our mortgage guide.

Scammers are taking advantage of the uncertainty and stress caused by Covid-19 to approach more people. Figures show financial scams are on the rise and falling victim could affect your long-term security. However, there are warning signs to keep an eye out for to protect your assets.

Since the start of the pandemic, research from Aegon, suggests a fifth of the population have faced approaches by scammers, with 2.8 million falling victim. With some people feeling the pinch due to lower incomes and others wanting to make the most of savings amid a climate of low-interest rates, financial scams are on the rise.

While many financial scams involve smaller sums of money, fraudsters target larger savings too. Information released by the Financial Conduct Authority (FCA) revealed scammers have successfully accessed more than £30 million from pensions in three years since 2017. Some of these victims lost as much as £500,000. Financial scams can not only have a devastating impact on your financial security but your wellbeing too.

The 5 most common financial scams

We often think we’d be able to spot a scam. But scammers are becoming more sophisticated and when you’re already under pressure it can be easy to overlook the warning signs. The first step to protecting your assets is to understand how scammers operate.

The FCA has identified the top five financial and bank scams as:

1. Boiler room schemes: These types of scams will often start with a call out of the blue. Scammers will typically offer high investment returns and use high-pressure sales tactics to try and push you into quick decisions, such as moving your money to another account.
2. Phishing scams and smishing scams: Phishing scams refer to emails you may receive that appear to be from legitimate sources, such as your bank. They will contain a link which the email will say you need to click on to verify your account, confirm a transaction or something similar. Instead, you’ll unwittingly give them your account details. Smishing scams are similar but the scam begins with a text.
3. Pension liberation schemes: Pensions are usually among our largest source of savings and so present a tempting target to scammers. Unsolicited contact claiming they can help you access your pension early or have high-return investment opportunities should act as red flags.
4. Homebuying fraud: When buying a property, we typically have a lot on our mind and scammers take advantage of this. Homebuying fraud involves a fraudster monitoring emails between a solicitor and a client intending to get you to transfer the sale money to them. As they’ve been monitoring communication, these emails can be convincing and lead to you sending large sums to the wrong account.
5. Freebie scams: A freebie or free trial can be tempting. But if you need to enter your card details you may be signing up for an expensive monthly subscription that can be difficult to get out of. Once you approve this type of billing, payments can occur without any further contact. Of course, many businesses use a free trial model. Before supplying card details, make sure the firm is legitimate and manage payments carefully.

In many cases, if you fall victim to a scam it will be the last time you see your money, so remaining vigilant is important. If you think you’ve fallen victim to a financial scam, contact your bank or provider and Action Fraud, they may be able to stop the release of funds or recover the money.

6 things you can do to protect your money

1. Be wary of all unsolicited contact

While unsolicited communication can be tempting, it’s often the first sign of a scam. If you receive a call, text or email about your finances out of the blue, be cautious. Fraudsters using this tactic will usually be offering high-return investment or saving accounts to tempt you. Phrases such as a ‘free pension review’ or ‘pension unlocking’ are often indicators too. A ban on cold calling about pensions came into effect in 2019.

2. Verify who you’re speaking to

If you don’t recognise the person you’re talking to, take the time to do some due diligence. This should include checking the FCA register, which will show you if a firm or person is authorised. Keep in mind that number spoofing is becoming more common. This is where a criminal will manipulate the caller ID to suggest they are from a legitimate business, such as your bank. If you’re unsure, hang up the phone and call the firm directly on another phone where possible.

3. Don’t make quick decisions

Financial decisions can have a huge impact on your life and goals. Don’t rush into making them. A fraudster will try to push you into making snap decisions, so you don’t have the time to weigh up your options. They may do this by offering time-limited deals or even sending a courier to your house with documents to sign. Always take some time to think about your decisions. A professional will understand this and give you the time and space you need without pressure.

4. Understand your financial assets

Criminals often use a lack of understanding of financial assets to their advantage. For instance, they may suggest complicated investment opportunities or that you can access your pension sooner than possible. By understanding your assets, you’re in a better position to spot those trying to scam you.

5. Ask questions

Financial decisions can have a huge impact on your life, don’t be afraid to ask questions if you need more information or clarification. A scammer may try to brush you off, but a professional will understand why it’s important and be happy to answer questions.

6. Be realistic

High returns can be tempting. After all, you want to get the most out of your money. But if someone is offering low-risk, high-return investments, take a step back and ask if it’s realistic. As the saying goes, if it sounds too good to be true, it probably is.

We’re here to help our clients with their financial plans, and that includes being aware of scams that could pose a threat to you. If you’d like to discuss your assets and how to get the most out of them with your aspirations in mind, please get in touch to arrange a meeting.

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

Back in July, Chancellor Rishi Sunak announced a second range of measures designed to protect the economy through the Covid-19 pandemic.

His next update was scheduled to be the Autumn Statement in the coming weeks. However, given the newly imposed Covid-19 restrictions and economic uncertainty, the Budget has been cancelled.

In a statement sent to the BBC, a spokesperson for the Treasury said: “As we heard this week, now is not the right time to outline long-term plans – people want to see us focused on the here and now.

“So, we are confirming today that there will be no Budget this autumn.”

Instead, on Thursday 24^th September, the Chancellor unveiled his winter economy plan, setting out the next phase of the economic response to the Covid-19 pandemic.

Introducing his new measures, the Chancellor acknowledged that the virus will be a fact of life ‘for at least the next six months’ and so the economy will need ‘a more permanent’ adjustment.

Here are the main points announced in Rishi Sunak’s latest speech.

A new Job Support Scheme

The Chancellor announced the Coronavirus Job Retention Scheme, dubbed the ‘furlough scheme’, in March just as the scale of the pandemic was becoming clear. The aim was to prevent a rise in unemployment when businesses were forced to shut down to slow the spread of Covid-19.

The furlough scheme initially paid 80% of the wages of workers that were unable to work, up to a maximum of £2,500 per month. As the economy reopened, employers had to pay 10% of the wages of those on furlough and workers could return part-time, with the government making up the hours not worked.

With the furlough scheme ending at the end of October, the Chancellor was keen to continue to support at-risk jobs.

A new Job Support Scheme means that the government and employers will jointly cover the cost of those having to work fewer hours. Under the scheme, businesses will have the option of keeping employees in a job on shorter hours, rather than making them redundant.

To be eligible for the scheme, an employee will have to work a minimum of 33% of their hours, in order that the scheme only protects ‘viable’ jobs.

For the remaining hours not worked, the government and employer will each pay one-third of the employee’s wages. It means that employees working 33% of their hours will receive at least 77% of their overall pay.

The scheme will begin on 1 November 2020 and last for six months.

It’s important to note that, while all small and medium-sized firms are eligible, large firms are only eligible if their turnover has fallen in the pandemic.

The Job Support Scheme can also be used in conjunction with the Job Retention Bonus that the Chancellor announced in his Summer Statement.

CBI director-general Carolyn Fairbairn says: “These bold steps from the Treasury will save hundreds of thousands of viable jobs this winter. It is right to target help on jobs with a future but can only be part-time while demand remains flat.”

An extension to the Self-Employed Income Support Scheme

The Chancellor has been keen to provide the same support to self-employed workers as to employed staff.

In his statement, he revealed that he would extend the Self-Employed Income Support Scheme to 30 April 2021, although at a much-reduced rate.

The extension will support viable traders who are facing reduced demand over the winter months, covering 20% of average monthly trading profits through a government grant.

More flexibility with government loan schemes

Sunak announced that, under his Pay as you Grow Scheme, he will offer more than one million businesses, which have borrowed under the Bounce Back Loan Scheme, the choice of more time and greater flexibility to make their repayments.

For example, businesses can now extend their loans from six to ten years, and businesses can choose to make interest-only repayments – or suspend repayments for up to six months – without affecting their credit rating.

Lenders who have been enabled to offer the Coronavirus Business Interruption Loan Scheme will also offer borrowers more time to make their repayments where needed.

The Chancellor also extended the application deadline for all coronavirus loan schemes – including the future fund – to the end of 2020.

Tax deferrals

Sunak announced that businesses who deferred their VAT this year will no longer have to pay a lump sum at the end of March 2021.

Instead, they will have the option of splitting it into smaller, interest-free payments over the course of 11 months. This will benefit up to half a million businesses.

The Chancellor also announced that any of the millions of self-assessed income taxpayers who need extra help can also now extend their outstanding tax bill over 12 months from January 2021.

VAT reduction extended for hospitality sector

In his Summer Statement, the Chancellor reduced the VAT rate applicable to hospitality businesses from 20% to 5%.

In his address, Sunak announced that he will extend this VAT cut to the end of March 2021. Sunak says that this will continue to support more than 150,000 businesses and protect 2.4 million jobs.

Get in touch

If you have any questions about how these measures might affect you or your business, please get in touch.

Financial advice can add real value to your life.

Our guide looks at the ways financial advice can help you reach your goals and improve wellbeing. From improved financial security as assets grow to confidence in your long-term plans, financial advice can deliver numerous advantages. Research shows that financial advice benefits those that take it. Through considering the value advice brings, it can be viewed as an investment rather than a cost.

Click here to download your copy of the guide.

If you’d like to discuss how financial advice can benefit you, please get in touch on 0117 3320230. We aim to not only improve your financial situation but your life through the advice we give.

The Covid-19 pandemic caused market volatility earlier this year and, while there has been a recovery, investment values may still be lower than they were at the beginning of 2020. In addition, knock-on economic concerns are also weighing on the minds of investors. So much so that some are considering changing their retirement plans as they’re worried they can’t afford to retire.

Almost one in five (18%) of people now plan to delay retirement, according to a survey from Aegon. Seeing pension values fall and the possibility of further volatility on the horizon can make it seem as through retirement plans have gone off track. However, this isn’t necessarily the case and you may still have enough to retire on.

Before you access your pension or delay your plans, it’s important to assess your own circumstances.

How has the market volatility affected your pension and other assets?

You no doubt saw headlines about stock markets ‘crashing’ and ‘sharp falls’ earlier this year. It can be alarming to read these, especially if you’re nearing retirement.

However, these headlines focused on the stock market alone, and investment portfolios typically hold a range of assets, including bonds and cash. As a result, these assets can act as a buffer when stock markets are volatile. Most pension funds will automatically reduce investment risk as you approach retirement age too. So, you may have been less exposed to the volatility than you first thought.

While your pension and other investments may have dipped, it’s unlikely they did to the extent headlines suggest. The first step should be to review your own pensions and their current value.

Knowing that your investments are lower in value than at the beginning of the year can be disheartening. However, when you take a long-term view, you’ve still benefited from saving into a pension, thanks to investment returns, tax relief, and employer contributions.

Before you make any changes to retirement plans, you should take stock of pension values.

How much is enough to retire on?

The next step is to understand what you need so you can afford to retire.

There are numerous factors to take into consideration here, including your desired lifestyle and life expectancy. You need to calculate how much you need annually throughout retirement.

Often retirees find their general outgoings fall, as they are no longer commuting to work and may have paid off the mortgage, for example. However, there may also be big one-off expenses to consider too. Perhaps you’re hoping to travel more, help children financially or renovate your home?

This is a time to think about what kind of retirement lifestyle you want and the goals you’d like to reach.

Once you’ve thought about your lifestyle, you should consider how this matches up with your pensions and other assets. It can be difficult to understand how the lump sum in your pension will provide a regular income and whether it’s enough.

This is where financial planning can help. We’ll help you see how your savings over the years translate into a retirement income that you can rely on for the rest of your life – whatever your lifestyle and aspirations.

Considering market volatility when you’re retired

Since 2015, Pension Freedoms have given retirees more choice. You can now access Defined Contribution pensions in several ways.

This includes drawdown, where you can make withdrawals when it suits you and the remaining amount stays invested. Your pension remains exposed to the market thereby giving your savings a chance to grow further while you’re retired. While this flexibility has proven a popular option among retirees, it also means you need to consider potential market volatility while in retirement.

The recent market activity has highlighted how volatility could affect retirement plans. If you intend to remain invested throughout retirement, it’s important to understand the impact and how you should manage short-term volatility. Again, this is an area we can help you with. It’s a step that can give you confidence as you head into retirement.

If you’d like to discuss your retirement plans in light of the current situation and what it means for your future, please contact us on 0117 3320230 or email hello@bluewealth.co.uk.

Please note: The above is offered only for general informational and educational purposes. It is not offered as and does not constitute financial advice. You should not act or rely on any information contained in this comment without first seeking advice from a professional.

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,