Category: news

HM Revenue and Customs (HMRC) collected more than £4.6 billion in Inheritance Tax (IHT) between April and December 2021, £600m more than the same period in the previous year.

Meanwhile, the value of estates keeps climbing. A large part of the reason for this is the increase in house prices. According to research from estate agency Savills, 1 in 42 homes are now worth more than £1 million, and around 80% of new “property millionaires” are outside London.

As house prices and other asset values continue to rise, more families will fall victim to IHT.

The good news is that everyone has a tax-free amount

While IHT is due on everything you own when you die, the good news is that everyone has a tax-free amount, known as the “nil-rate band” (NRB). In 2022/23 the NRB allows you to give away £325,000 tax-free if you are single or £650,000 if you are married.

You might also be eligible for the residence nil-rate band (RNRB), which could boost your tax-free allowance to £500,000 for a single person or £1 million for a married couple, if you leave your home to children or grandchildren.

Anything above these thresholds is typically taxed at 40%.

Estate planning can help protect your wealth

An important part of the work we do with our clients is helping to preserve family wealth, ensuring it’s passed on to future generations, without being unnecessarily eroded by IHT charges.

Read on to find out five ways to protect your wealth from IHT liability.

1. Write a will

Without a will in place, your estate may be distributed in a way that doesn’t match your wishes. Helpfully, a will can also be used to help reduce IHT liability. For example, ensuring your main home goes to your child or grandchild can mean you’re able to use the RNRB, mentioned above.

In addition, if you leave at least 10% of the value of your estate to charity, you could reduce the IHT rate payable on your estate from 40% to 36%.

2. Use the gifting allowances

Gifting some of your wealth while you’re still around can be rewarding, as well as helping to reduce your estate’s liability for IHT when you pass away.

There are several gift exemptions you can make use of each tax year. The following gifts fall immediately outside of your estate:

• Up to £3,000 each tax year
• Up to £250 per person each tax year, as long as you haven’t used another exemption on the same transfer
• Wedding or civil ceremony gifts up to £1,000 per person, increasing to £2,500 for grandchildren and £5,000 for children and stepchildren
• Payments that help with another person’s living costs, such as an elderly relative or child.

On top of these, you could also use potentially exempt transfers (PETs), which allow you to give unlimited amounts to anybody you like. If you gift more than £3,000, you will not immediately be taxed. However, if you pass away fewer than seven years after making the gift, it will be subject to IHT.

Unlike the standard 40% IHT charge, PETs exist on a sliding scale, known as “taper relief”.

Source: HMRC

3. Make gifts from surplus income

You can also use surplus income to make gifts. For gifts to qualify, they must form part of your normal expenditure without harming your standard of living. If you decide to take advantage of this, it’s important to keep good records.

If you’re interested in gifting some of your wealth, or income, get in touch. We can help you understand how much you can afford to give away, without jeopardising your own financial situation.

4. Ringfence assets with a trust

Another useful way to pass your wealth without triggering an IHT charge is to establish a trust.

Trusts can be particularly useful when:

• You want to pass money to children or grandchildren but think they are too young to spend it wisely
• You wish the money to be used for a specific purpose, such as education, buying property, or another milestone in life
• You want to cover the costs of your IHT bill using life insurance.

Get in touch and we’ll assess your circumstances and help you understand the type of trust that best suits your objectives.

5. Take out life insurance

Life insurance won’t reduce IHT, but it will mean that any tax your estate is liable for can be paid without eroding the value of your estate.

If you know your estate is likely to be subject to IHT, you can set up a life insurance policy that will pay a lump sum on your death to cover the expected tax bill.

Should you wish to use life insurance in this way, it’s crucial that the life insurance policy is placed in trust. Failure to do this will mean it will count as part of your estate and end up increasing the amount of IHT due.

Get in touch

We can help you to understand whether you have an IHT liability, and if so, what steps you can take to reduce or mitigate it.

If you would like to discuss your potential exposure to the tax and how you may be able to leave more money to your loved ones, email hello@bluewealth.co.uk or call us on 0117 332 0230.

Please note: The content of this newsletter is offered only for general informational and educational purposes. It is not offered as, and does not constitute, financial advice.

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.

Levels and bases of, and relief from, taxation are subject to change.

Blue Wealth Ltd is an appointed representative of Best Practice IFA Group Ltd, which is authorised and regulated by the Financial Conduct Authority.

These days, more people are choosing to take a phased retirement. Rather than viewing their retirement as a “cliff edge”, more older workers are easing their way into retirement and gradually cutting back work commitments.

In fact,  new research, published by ProfessionalAdviser, has revealed that 66% of people due to retire in 2022 say they intend to keep working in some form to help combat the cost of living crisis or simply to keep busy.

There are many advantages for choosing a phased retirement

Phased retirement allows a gradual reduction of work hours. This could involve going from full-time to part-time employment, taking on a job-sharing role, or perhaps working as a consultant or on a seasonal, or interim basis.

If this sounds appealing, here are five benefits of phased retirement.

1. Pensions last longer or provide more income

Pension Freedoms legislation, which came into force in April 2015, allows you to flexibly access your pension savings from age 55. Depending on the lifestyle you want, instead of buying an annuity, you can vary how much and when you draw income from your pension.

A phased retirement means you’ll continue earning an income and probably need less money from your pension.

This has two benefits: first, more of your savings will remain invested and enjoy more potential compound growth. Second, when you fully retire, you’re likely to have saved more money, giving you a higher income and a better quality of life as your pension will not need to support you for as long.

Continuing to work for longer may also mean you decide to defer taking your State Pension. This can be beneficial since it increases by 1% every nine weeks you defer – or just under 5.8% for every 52 weeks.

You can defer your State Pension for as long as you want. Whether deferring is in your best interests will depend on your individual circumstances. Get in touch to find out whether deferring your State Pension is a sensible option for you.

Read more: 5 practical steps you should take to prepare your finances for a comfortable retirement

2. Pensions can benefit from better growth potential

As we touched on above, keeping your pension invested while you continue to earn an income means your retirement savings could benefit from more growth.

Pension providers adapt the way funds are invested as you get closer to your retirement date to help reduce the risk of any steep drop in value of your savings if the market falls.

This is called pension “lifestyling”. Following a pension lifestyling strategy, your pension provider moves funds from higher risk investments – that provide greater potential growth – to lower risk investments, which can reduce the potential returns.

By continuing to earn an income and delaying your full retirement, you could leave your pension invested in higher risk investments and enjoy greater growth potential.

If you’re thinking of keeping your pension savings invested in higher risk funds, speak to a professional financial planner to ensure you fully understand all the implications of your decision.

3. You have more time to get used to your new lifestyle and expenditure

We have helped many people successfully plan for their retirement. However, one of the challenges we often see people struggle with is understanding the amount of income they will need when they stop work.

Taking a gradual approach to retirement has the advantage of providing a more accurate idea of your spending patterns as you approach full retirement. A period of “semi-retirement” can give you a useful opportunity to get a better feel for how much your pension will need to provide.

It’s also a helpful time to get comfortable with a change in pace of life.

4. Buy an annuity at a time to suit you

Once you use your pension to buy an annuity, it’s not possible to reverse the decision. Your annuity sets an income for life and its value is determined at the time you decide to buy one.

Where necessary, phased retirement can allow you to draw a small income from your pension while you work, and then opt to buy an annuity later in life when you want the security of an income.

The advantage of this is that it allows the luxury of time to decide when you lock yourself into an annuity. Buying an annuity later in life could also mean that the resulting income is more generous.

5. You can continue to pay into your pension

As well as continuing to enjoy the mental health benefits that come with the sense of purpose and social interaction work brings, you can also continue to contribute towards your pension. And, of course, if you’re a member of your workplace pension, benefit from employer contributions, too.

Drawbacks not to be ignored

There are other consequences to keep in mind that may affect your decision, especially if you’ll be drawing from your pension.

Watch out for the pension dipping trap

If you start drawing money from your defined contribution pension fund, the amount you can contribute to your pension while still enjoying tax relief might reduce.

This is due to the Money Purchase Annual Allowance (MPAA).

To benefit from pension tax relief, most people can contribute up to £40,000 or 100% of their annual earnings, whichever is lower. This sum includes any employer contributions.

However, if you trigger the MPAA, this reduces to £4,000 a year.

Triggering the MPAA could lead to an unexpected bill. If you had planned to contribute more than the £4,000 to your pension, it could also have a negative impact on your long-term retirement plans.

The MPAA won’t normally be triggered if:

• You only access your tax-free lump sum, usually 25%
• You buy an annuity
• You move your pension into a Flexi-Access Drawdown scheme but don’t withdraw an income
• Your pension is valued at less than £10,000.

The MPAA rules can be complex. If you’re unsure if your plans may trigger the MPAA, please get in touch.

Don’t forget to factor in Income Tax

Income from both employment and pensions may be liable for Income Tax. If your combined income exceeds the £12,570 Personal Allowance, Income Tax will need to be paid.

If you cross the threshold into another tax bracket, you could leave yourself with a higher tax bill than you expected. So, keep a close eye on any flexible withdrawals you make from your pension.

The rules around your tax-free lump sum and pension income can be complicated and getting it wrong could carry severe tax implications. We can help you navigate the risks and ensure that your retirement is worry-free.

Get in touch

If you would like help exploring the possibilities for a phased retirement, please get in touch. Email hello@bluewealth.co.uk or call us on 0117 332 0230.

The content of this newsletter is offered only for general informational and educational purposes. It is not offered as, and does not constitute, financial advice.

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.

Blue Wealth Ltd is an appointed representative of Best Practice IFA Group Ltd, which is authorised and regulated by the Financial Conduct Authority.

In the 12 months to March 2022, the rate of inflation was 7%.

In simple terms, inflation means the cost of goods rise. The higher the rate of inflation, the quicker prices are rising. It can affect your day-to-day budget and your long-term wealth.

“Inflation is taxation without legislation.” – Milton Friedman, American economist, statistician, and recipient of the 1976 Nobel Prize in Economic Sciences

More than a fifth of people say the rising cost of living is the biggest threat to their personal finances in 2022. So, this guide can help you understand why inflation is an important consideration when making plans and what steps you can take to reduce the effect. It covers:

• How the rate of inflation is calculated
• Why the rate of inflation is higher than normal now
• Whether the value of your assets has kept pace with inflation
• Why inflation can mean your savings fall in value in real terms
• How inflation can affect your spending power in retirement
• And more…

Download “Your guide to inflation and how it can affect your wealth” to find out more about inflation and what it could mean for you.

If you have any questions about how inflation could affect your financial plan, please contact us.

Looking forward to retirement with high expectations, sometimes for several years, could lead to disappointment when the realities of retiring hit home.

To avoid the negative side-effects of loneliness, boredom, or a lack of purpose, ask yourself these five questions before you set an alarm for work for the last time.

1. What will I do with all my free time when I’m no longer working?

The average life expectancy for a 60-year-old man today is 84. Meanwhile, the average for a 60-year-old woman is 87. There’s also a one in four chance that men could live to 92, and women to 94.

These life expectancy figures means that your retirement could equate to another half of your life. So, think about how you’ll make the time you have interesting and meaningful.

Are there pursuits you always wanted to try but never got around to, or hobbies you’d like to dedicate more time to?

If you have a bucket list, dig it out or start from scratch and write a retirement bucket list. Dream big and list all the things you want to do, places you’d like to go, hobbies you’d like to pursue, and projects you’d like to achieve.

If you have a partner, work on this together. Pursuing passions separately is good, but it’s wise to avoid going too far in developing different ideas for how you want to spend your future, as this could create friction down the line.

2. Where do I want to travel?

Restricted holiday time during your working life may mean there are places in the world you’ve never had an opportunity to explore.

Maybe you’d like to spend a month on safari in Africa, visit India to track down Bengal tigers or see the Taj Mahal? Or perhaps you’d like to spend extended time at sea and live the luxury life, seeing the world by cruise – for days, weeks, or even months at a time?

Listing all the places you’d like to visit will allow you to dream of the possibilities. It will also help you plan how and when you’ll make the trips while you’re still fit enough to make the most of every adventure.

3. What do I want to try?

Back on home turf, consider whether there are activities or hobbies you’d like to get involved with, or things you already do that you’re looking forward to doing more of.

Maybe you’re a keen cook and, with extra time available, want to perfect your kitchen skills by taking a course of Cordon Bleu cooking classes? If you’re fascinated by history, you could volunteer at a local museum or National Trust property.

To keep things interesting, you might even decide to sign up as a film extra. With a little luck and flexibility, you could find yourself on the big screen (albeit in the background) and even a little extra cash in your pocket. Don’t expect it to be glamorous – and turn up to job signings with a book, as there could be a lot of hanging around!

4. How will I keep my mind and body active?

Staying fit – both mentally and physically – should help you enjoy a longer retirement.

Regular physical activity is one of the best things you can do for your health. Research has shown that just 15 minutes of exercise each day can boost longevity, ward off depression, improve sleep, lower blood pressure, and decrease the risk of chronic illnesses.

You don’t have to join a gym – golf, yoga, swimming, walking, running, and cycling can all help keep you fit and active.

And don’t forget to exercise your brain too.

Keep your grey matter active with reading, crossword puzzles, or sudoku, or games such as bridge, chess, or backgammon. Even five minutes spent playing Wordle every day can make a big impact on your cognitive health.

Studies have found that older adults who regularly play word and number puzzles have sharper mental capacity. The more often they played, the better their brain function. Other research has shown that doing crossword puzzles could reduce the onset of dementia by up to two and a half years.

5. Who will I see during a normal week?

As you consider everything you want your retirement to be, make sure to build regular social interactions into your weekly activities.

The loss of regular social contact is an aspect of retiring that many people find difficult to adjust to. If your social life was intrinsically tied to your work, it’s important to plan ahead to avoid becoming isolated when you’re no longer spending time with colleagues.

Avoid loneliness creeping up on you by building regular social activities into your week. Join a club, take up a new hobby, or meet up with a local friend for a regular walk, lunch, or a coffee.

If you’re looking for more inspiration or want to learn something new, u3a run group activities for retirees across the UK. There’s a wide collection of local and online learning groups with loads of opportunities to get involved in. From hiking to painting, book clubs to foreign languages to quizzes and podcasts, there’s bound to be something to inspire you.

Get in touch

If you’re looking forward to retiring in the next few years, and would like to chat about your plans, get in touch and we’ll help you build a retirement plan that matches your goals. Email hello@bluewealth.co.uk or call us on 0117 332 0230.

The content of this newsletter is offered only for general informational and educational purposes.

Against the backdrop of the continuing war in Ukraine, the chancellor has delivered his spring statement.

The war has contributed to uncertainty in the global economy, with the Office for Budget Responsibility (OBR) saying that, “given the unfolding situation in Ukraine, there is unusually high uncertainty around the outlook”.

Disruptions in global supply chains and the Ukraine war have led the OBR to revise downwards their forecast for growth over the next five years. The OBR now forecasts GDP to rise by 3.8% in 2022, down from its 6% growth forecast in last October’s economic and fiscal outlook.

The OBR then forecasts growth of 1.8% in 2023, 2.1% in 2024, 1.8% in 2025, and 1.7% in 2026.

Another current factor underpinning Rishi Sunak’s speech is rising inflation. According to the Office for National Statistics (ONS), inflation in February reached a 30-year high of 6.2%.

As the economic consequences of the Ukraine war continue to unfold, the OBR expects inflation to average 7.4% this year, with a further rise in energy costs in the autumn set to contribute further to the so-called “cost of living crisis”.

The chancellor tackled this issue first.

Fuel duty to be cut by 5p a litre until March 2023

As well as the £9 billion plan to help households pay around half of the April energy cap increase, unveiled by the chancellor in February, fuel duty will be cut for only the second time in 20 years.

Sunak cut the duty by 5p a litre until March 2023, calling it the “biggest cut to all fuel duty rates ever”. The reduction in duty will come into effect from 6 pm on 23 March 2022.

According to the Treasury, this cut represents a saving worth around £100 for the average car driver, £200 for the average van driver, and £1,500 for the average haulier, when compared with uprating fuel duty in 2022/23.

Cut in VAT on home energy installation

To further encourage households to invest in energy-efficient measures, and to keep energy costs down, Sunak announced an extension to the VAT relief available for the installation of energy-saving materials.

Taking advantage of Brexit freedoms, the chancellor announced that homeowners looking to install measures such as heat pumps or solar panels won’t pay any VAT (except for households in Northern Ireland).

The Treasury say that a typical family having rooftop solar panels installed will save more than £1,000 in total on installation, and then £300 a year on their energy bills.

A three-step tax plan for the rest of the parliament

Arguing that it’s “only Conservatives [who] can be trusted with taxpayers’ money”, Sunak unveiled a new three-point tax plan for the remainder of this parliament.

Calling it “a principled approach to cutting taxes”, the chancellor outlined the “direction of travel” of how he intends to reduce the tax burden responsibly and sustainably.

1. Help families with the cost of living

As the NHS rebounds from the Covid-19 pandemic, and with the challenges facing the social care sector, Sunak argued that it was only right that the rise in National Insurance contributions (NICs) – which will become the new Health and Social Care Levy in 2023 – stays.

However, to reduce the tax burden on working people, the chancellor raised the National Insurance Primary Threshold and Lower Profits Limit, for employees and the self-employed respectively, from £9,880 to £12,570. This equalises the NICs and Income Tax threshold from July 2022.

This means that individuals will be able to earn up to £12,570 a year without paying any Income Tax or NICs.

This increase will benefit almost 30 million people, with a typical employee saving more than £330 in the year from July. Around 70% of NICs payers will pay less contributions, even after accounting for the introduction of the Health and Social Care Levy.

The Treasury say that around 2.2 million people will be taken out of paying Class 1 and Class 4 NICs and the Health and Social Care Levy entirely.

Sunak also announced that, from April, self-employed individuals with profits between the Small Profits Threshold and Lower Profits Limit will not pay Class 2 NICs. So, lower-earning self-employed people will be able to keep more of what they earn while continuing to build up NI credits.

2. Create conditions by encouraging higher growth

As the chancellor set out at the Mais Lecture in February, the government considers that a new culture of enterprise is essential to drive growth through higher productivity.

So, Sunak announced a range of measures aimed at businesses including:

• The temporary £1 million level of the Annual Investment Allowance will be extended until 31 March 2023.
• The business rates multiplier will be frozen in 2022/23.
• A new temporary 50% relief in Business Rates for eligible retail, hospitality, and leisure businesses. It means the average pub, with a rateable value of £21,000, will save £5,200. The average convenience store, with a rateable value of £28,500, will save £7,000.
• Business rates exemptions for eligible plant and machinery used in onsite renewable energy generation and storage will be brought forward to April 2022.
• From April 2023, all cloud-computing costs associated with R&D, including storage, will qualify for R&D relief.
• The Employment Allowance will increase to £5,000. This means eligible employers will be able to reduce their employer NICs bills by up to £5,000 a year, and that businesses will be able to employ four full-time employees on the National Living Wage without paying employer NICs.

Sunak also announced he would be consulting on a range of measures to reform business taxes and reliefs ahead of the autumn Budget.

3. Proceeds of growth shared fairly

While arguing that it would be “irresponsible” to cut taxes in the current environment, Sunak reaffirmed his commitment to reducing the tax burden in the coming years.

He said that, by 2024, the OBR expects inflation to be back under control, debt to be falling sustainably, and for the economy to be growing.

So, presuming the government will have met its own fiscal principles, the chancellor committed to reducing the basic rate of Income Tax from 20% to 19% from April 2024.

This is a tax cut of more than £5 billion a year and represents the first cut in the basic rate of Income Tax in 16 years.

Interestingly, with more than 1,000 tax reliefs and allowances available, the government have also committed to considering tax reform “to better support a fair, efficient, simple, and sustainable tax system”.

Watch this space!

Get in touch

If you have any questions about how the spring statement will affect you and your finances, please get in touch.

All information is from HM Treasury Spring Statement 2022 document.

Please note

This article is for information 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.

Retirement is something many of us think about and look forward to. The best way to make sure your retirement is everything you hope is by having a well-laid plan.

Taking time to understand how much money you need and how you can use your assets to achieve the level of income required can inspire confidence and peace of mind that the next phase of life will be enjoyable and affordable.

To help ensure you are on course for the lifestyle you hope to enjoy, here are five practical planning steps you should take in the years leading up to your retirement.

1. Consider the lifestyle you’d like to enjoy when you retire

Take time to think about your retirement and how you’d like to spend it. Imagine what you might want to achieve when you’re no longer working.

This new chapter presents a perfect opportunity to revisit your bucket list, experience new things, and create a lifestyle that you love.

According to The Great British Retirement Survey 2021, carried out by interactive investor, 3 in 10 workers said they hope to travel more when they retire. Whether travelling is your goal, or you have something else in mind, consider what you want your day-to-day life to be like. Also, remember to consider any one-off experiences you’d like to enjoy.

2. Figure out your income needs

With a good idea of how your retirement might look, you can start to calculate how much income you’ll need to enjoy your preferred lifestyle.

This can be a useful exercise. It will help you gain an understanding of whether you’re on track or if you might need to adjust your savings and investments while you have time.

Typically, most people require between 60% and 80% of their pre-retirement income, but this depends on the plans you have in mind.

3. Think about how your income needs may change over time

According to data from the Office for National Statistics (ONS), the average man in the UK can expect to live until 79 while the average woman lives to be around 83.

This means that you’ll probably be able to enjoy a much longer retirement than previous generations. However, it also means that you may need to consider how your circumstances and income needs might change over time.

Inflation is one of the biggest risks to your retirement lifestyle. Remember that, if you expect to live for 20, 30, or 40 years after you retire, your income will need to keep pace with rises in the cost of living over that period.

4. Review your income sources and assets

Once you’ve worked out the income you need, you’re ready to figure out if you have adequate income sources to fund the retirement you want.

To form a picture of the income you could receive during your retirement, gather information on the pensions and other assets you have.

Establish what you can expect to receive from the State Pension

Your State Pension forecast, available from the government website, will tell you how much you could get, when you can get it, and whether it’s possible to increase it.

Check for gaps in your National Insurance contributions (NICs)

As with your State Pension, you can check your National Insurance record on the government website. This will also tell you if it’s possible to pay voluntary contributions to make up for any gaps you may have, which could boost the amount of State Pension you receive.

Track down all your pensions and investments

If you’ve lost track of some pensions or investments but know who the providers are, call them and ask for an up-to-date statement. Alternatively, if it was an employer pension, your old employer should be able to help you locate the details.

You can also use the Pension Tracing Service to track down lost pensions.

Get up-to-date information

Make sure you have up-to-date information on all your pensions and investments. Your last annual statement should be enough to help you understand the approximate value and any income you might receive in the future.

5. Talk to a financial planner

In the years leading up to your retirement you should think about how your savings are invested. If you are looking for growth, it could pay to consider higher-risk investments that could produce greater returns.

Alternatively, if your retirement is imminent, you may prefer to move your savings into a fund that exposes your money to less risk.

We can help ensure that your pension investment strategy aligns with your appetite for risk while generating the best possible returns.

In addition to your pension savings, you may have other investments that you have been using to save for your retirement.

Collating a full picture of all the assets you could use to generate your desired income can get complicated. We can help you work out how to best use your assets to provide a tax-efficient income that is sustainable over the long term.

Get in touch

If you’re looking forward to retiring in the next few years, we can help you build a retirement plan that matches your goals. Email hello@bluewealth.co.uk or call us on 0117 332 0230.

The content of this newsletter is offered only for general informational and educational purposes. It is not offered as, and does not constitute, financial advice.

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.

Blue Wealth Ltd is an appointed representative of Best Practice IFA Group Ltd, which is authorised and regulated by the Financial Conduct Authority.

Since the start of 2022, you’ve probably noticed that global markets – and perhaps the value of your pension or investments – have been a little uncertain.

Over the last week or two, the ongoing situation in Ukraine has exacerbated this volatility.

It’s natural to feel nervous or worried when national or global events have a direct influence on your wealth. In recent weeks, there has been an almost perfect storm of events that have conspired to unnerve markets around the world, including:

• The Russian invasion of Ukraine
• Rising inflation across the developed world
• Steep rises in the cost of energy for both domestic and business customers
• Ongoing Covid concerns
• Continuing global supply chain issues.

Read on to find out more about how markets have fared so far in 2022, and three helpful tips to manage your concern during a difficult period.

Markets have endured a volatile start to 2022

Since the turn of the year, markets have been noticeably jittery. Between 1 January and 26 February 2022, the US S&P 500 index fell by around 8%, while the German DAX fell by around 9% in the same period.

Despite falls in some markets, it’s interesting to note that, while the UK stock market may have been volatile in 2022 to date, the FTSE 100 is broadly at the same level it was at the start of 2022 – even with everything that’s happened on the global stage.

You can see this in the chart below, that shows the performance of the FTSE 100 from 1 January to 26 February 2022.

Source: London Stock Exchange

In simple terms, if you had invested in a FTSE 100 tracker, the value of your investment would be broadly the same at the end of February as it was at the start of January.

However, with experts predicting a protracted war in Ukraine alongside an inflation rate not seen for decades, it’s likely that a tricky few months lie ahead.

So, here are three tips that may help you manage any anxiety you have about your finances.

1. Try not to panic

Imagine the value of your home had fallen by 10%. What would you do?

Would you immediately panic, worry about potential further erosion of value, and sell your home straight away?

Or would you remain patient, trust that markets generally tend towards growth, and wait until prices recover?

It’s almost certain you’d take the second path. This is also a good way to think about the value of your pensions, ISAs, shares, and investments.

We only have to go back a couple of years to see this in action.

One of the immediate effects of Covid-19 arriving in the UK, and the first national lockdown, was that the UK stock market fell sharply. Between 21 February 2020 and 23 March 2020, the value of the FTSE 100 fell by just under a third, as the chart below shows.

Source: London Stock Exchange

Had you sold your investments at the bottom of the market, you’d likely have crystallised a significant loss.

However, had you remained patient, the FTSE 100 had recovered to its February 2020 level by the winter of 2021 – less than two years later.

Source: London Stock Exchange

The lesson here is that, over time, markets typically recover. You may have to remain patient, but cashing in equities after a market fall can simply turn a paper loss into an actual loss.

2. Don’t check the value of your portfolio every day

In periods of uncertainty, you may check the value of your investments more regularly than usual. It’s a perfectly natural reaction to volatility.

However, this often only increases your anxiety and worry and can magnify sharp moves in the markets.

For example, the FTSE 100 fell by 3.8% on 24 February – the day Russia invaded Ukraine – but rose by almost 4% the following day.

You also have to consider that it’s highly likely that your investments are diversified across sectors and countries. So, hearing a negative headline about the FTSE 100 on the BBC news won’t necessarily reflect what’s happened to the value of your own assets.

That’s because you’ll likely be invested in dozens of countries and hundreds of companies around the globe. Diversification helps to mitigate a fall in one area because it can be balanced by growth in another.

In a world of rolling 24-hour news, it can be hard to “drown out the noise”, but resisting the temptation to check the value of your assets every day can help you ride out periods of uncertainty.

3. Focus on your long-term goals

While you may be concerned about the short-term volatility of markets, it’s important to remain calm and stay focused on your goals.

Whenever you invest in equities, short-term volatility is something that you should expect and accept. Everything from the Budget to global geopolitics can affect what happens to markets around the world. On any given day or week, prices will fluctuate in the short term.

However, in the long term – and that’s what you’re likely to be investing for – markets tend to offer positive returns.

Here’s a useful summary of the annual return of some of the major stock indices over the 10 years to 2021. It shows that, with one or two exceptions, stock markets over the last decade have tended to produce positive annual returns – even in the light of Brexit, economic uncertainty, and Covid-19.

Of course, 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.

Source: JP Morgan, FTSE, MSCI, Refinitiv Datastream, Standard & Poor’s, TOPIX, J.P. Morgan Asset Management. All indices are total return in local currency, except for MSCI Asia ex-Japan and MSCI EM, which are in US dollars. Past performance is not a reliable indicator of current and future results. Data as of 31 January 2022.

If your long-term goals haven’t changed, it’s unlikely that your plans should.

Your goals are likely to be the same as they were a week or a month ago. We design our investment strategies with the long term in mind, and this naturally considers periods of both positive and negative returns.

We’re here to help

One of the ways we can help you achieve your goals is by acting as a “sounding board” during periods of instability. We’re here to help you avoid making knee-jerk decisions that can impact your long-term goals.

If you would like to chat to us about the current uncertainty, or you’d like to review your financial plan, please get in touch.

Please note

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.

In 1793, a vast army of the French First Republic locked horns with a combined force of Royalists and their foreign allies at the port city of Toulon. It was in this battle that a young artillery officer caught the attention of his superiors, demonstrating not only a high level of organisational skill, but also tactical brilliance and the charisma needed to inspire his men.

This officer was, of course, Napoleon Bonaparte, and the Siege of Toulon would be the first major stepping stone in his long and glorious career.

When you’re looking for tips for growing your wealth, Napoleon isn’t the first person you might think of. Yet, his innovative and dynamic style of leadership can teach you many valuable lessons.

Read our latest guide to learn more about Napoleon and why he can teach you the importance of:

1. Having reserves to protect against unexpected shocks
2. Keeping an eye on inflation
3. Understanding your attitude to risk
4. Diversifying your assets
5. Making an informed decision.

Download your copy of 5 lessons that Napoleon can teach you about your growing your wealth to learn more.

If you have any questions about investments or your financial plan, please contact us.

We are more aware than ever of how the choices we make can affect the environment and social wellbeing of the planet. And this concern has filtered into decisions about how and where we invest our money.

This mounting interest in investing with consideration for both the environment and towards social responsibility has led to a huge number of new ESG investment funds coming to the market.

There are now more than 343 sustainable investment funds available to UK investors. And Morningstar reported that 169 new ESG funds were launched during the first quarter of 2021 alone.

But what does ESG actually mean, and how do you know which funds are doing good for the planet? More importantly, can these funds also provide good investment returns?

Read on to find out everything you need to know about ESG investing.

ESG stands for “environment, social, and governance”

While ESG is the most popular term for ethical investing, other terms you may come across include “SRI”, or socially responsible investing, “impact investing”, and “ethical screening”.

Multiple labels can make it difficult to know where to start. This article focuses on ESG, so to help clarify things, this is how it all breaks down in business practices:

E is for environment

Environmental factors include climate change, greenhouse gas emissions, carbon footprint, water usage, biodiversity, renewable energy, and pollution and waste. An example you might consider when assessing a company’s ESG rating is how much water they use in their manufacturing processes.

S is for social

Social factors include community relations and labour policies, product safety, supply chain sourcing, and social impact reporting. If you want to ensure you’re investing in a company that cares about their people, you may want to seek one that pays more than the minimum wage or seeks to hire a diverse work force.

G is for governance

Governance factors include shareholder rights, diversity, business ethics, and transparency. An example of good governance practice would be a company with a diverse board or one whose founder doesn’t hold majority voting rights.

Decide what you care about most

If you’re interested in making sure you invest in companies that care about the world, start by thinking about what it is that most matters to you.

For example, if climate change is your top concern, you might decide to avoid investing in companies that manufacture fossil fuels or rely on such fuels in their manufacturing.

However, if you’re more concerned about the way a business treats their people, you may want to focus your attention on the social side of ESG and invest in companies who pay their employees well and ensure good working conditions.

Risks to be aware of before you commit your funds to ESG

Although the Financial Conduct Authority are making moves to regulate and standardise ESG funds, there isn’t yet an agreed-upon standard for evaluating ESG performance.

Without a measure that companies must adhere to, inconsistencies in ESG portfolios and funds are inevitable. For example, most people would be surprised to learn that Shell is listed as an ESG company; this is because they invest heavily in researching green energy solutions.

To be sure your ESG funds align with your values, learn how the fund screens its underlying investments.

New ESG proposals should be announced by spring 2022

In late 2021, an advisory group, overseen by the FCA, met for the first time to discuss how ESG fund labelling could be improved. With new regulation likely to be implemented, you may wish to wait until the FCA have completed their research before you commit your funds to ESG.

Waiting until there’s a more widely accepted measure companies must attain to gain a recognised ESG rating may help you avoid the potential of buying an investment that doesn’t truly align with your values.

Is investing in ESG good for my money?

ESG companies can perform better than non-ESG companies. Although research is limited, studies that have been carried out tend to show that ESG investing as part of a well-balanced portfolio can reduce risk and generate competitive investment returns.

In fact, a study, conducted by Morningstar in 2020, found that the majority of ESG strategies performed better than non-ESG funds over one, three, five, and 10 years. And research published in the Financial Times found that “close to 6 out of 10 sustainable funds delivered higher returns than equivalent conventional funds over the past decade”.

Some believe that this may be because a company focusing on ESG requires strong leadership. Since ESG initiatives rely on long-term strategies, a leadership team who can realise long-term outcomes – while successfully running the core business – is a competitive strength.

Remember, ESG factors are no guarantee of investment performance. As with any stock market investment, you may still experience short-term volatility and there is always some risk involved.

One of the most important aspects for long-term investment performance is having a well-diversified portfolio across different asset classes and geographies.

There’s a lot to take into consideration when approaching ESG investment. We can help you understand all your options and explain how underlying companies stack up with their ESG business practices. We’ll go through all the information and find a suitable approach to building your investment portfolio based on your values and long-term financial goals.

Get in touch

If you’d like to learn more about ESG investing and how you can invest your money and do good for the world, please get in touch.

Email hello@bluewealth.co.uk or call us on 0117 332 0230.

The content of this newsletter is offered only for general informational and educational purposes. It is not offered as and does not constitute financial advice.

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.

Blue Wealth Ltd is an appointed representative of Best Practice IFA Group Ltd, which is authorised and regulated by the Financial Conduct Authority.

Setting out a financial plan and thinking about your long-term goals if you have a family is important. It can help ensure you reach your goals and create security for you and future generations.

For parents and grandparents, thinking about family when setting out your financial plan can help you protect the people that are most important to you and help you get a head start on milestones you may want to help loved ones with.

Perhaps you want your children to go to private school or leave behind an inheritance that will create later life financial security? By making family a core part of your financial plan, you’re more likely to turn these goals into a reality.

The first section of this guide looks at practical things you can do to create financial security, like writing a will or opening a savings account for a child, and answers some questions you may have, such as: should I create a trust to pass on wealth?

It’s not just about the financial support we’re able to offer family either. Passing on knowledge and experience can be crucial in creating long-term security for the next generation. The second part of this guide looks at how you can help children and grandchildren lay the foundations for financial security in adulthood.

Download a copy of Your Guide to Children and Money to learn more.

If you have any questions about the topics covered in the guide, or would like to discuss what you can do to improve the financial security of your family, please get in touch.