Finance

5 Financial Planning Conversations for you and your Family

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Discussing finances can evoke anxiety or discomfort, and this tension doesn’t ease when family members are involved..

How can you make financial planning conversations go smoothly?

  • Your Estate

Discussing who will inherit will help you avoid future disagreements, ensure your Will is up to date and minimise inheritance tax liabilities

  • Succession Planning

Building a succession plan that suits your needs ensures you have laid the firm foundations for your family’s future

  • Lifetime Gifting

It’s possible to gift tax-efficiently during your lifetime using various allowances and exemptions

  • When I’m gone Information

Discuss where you’ll safely leave basic details of your bank accounts, savings, investments, and utility providers

  • Power of Attorney

You can put in place a power of attorney, a legal document enabling you to name one or more people to look after your affairs if you lose capacity

If you would like to discuss your family’s financial future and how we can help, please get in contact

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After Retirement – helping your loved ones

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Your financial adviser will have helped you plan a secure retirement lifestyle and naturally your thoughts will now be turning to how you can help your family now and in the future. Your adviser will guide you through key stages including 

  • Estate planning 
  • Legislation changes and their impact 
  • Tax implications 
  • Gifting 
  • The role of Wills, Trusts and Lasting Powers of Attorneys 

Your adviser’s role is to ensure you enjoy your retirement and bring expertise into successfully passing on your wealth in the right stages. 

If you would like to discuss your and your family’s financial future, please get in touch.

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I wish I’d known that… Why it’s important to have financial advice

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Many times our advisers hear ‘I wish I had known that’, and it reinforces the real difference having a financial adviser onboard can make to both building your financial plan and making sure you stay on track through your lifetime.

If you’d like to discuss your financial future, and how a financial adviser can support you, please get in touch with our expert team:

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A Labour Government with a large majority – what are the implications for your financial planning?

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With the votes cast and Kier Starmer and his Labour party securing a landslide majority, the financial markets are anticipating a period of growth and stability. 

With a tumultuous three Prime Ministers and five Chancellors since 2019, hopefully the large Labour majority and their stated focus on growth and cautious fiscal policies will bring about much needed financial security and organisational collaboration so important to the markets and investors. 

Stating she ‘means business’, the UK’s first female Chancellor Rachel Reeves spoke of the overhaul of finances saying “These are the first steps that we will take to bring that growth back to the economy and I’m determined to work, as are all of my colleagues, to do that, to unlock the private sector investment we need to grow our economy.” 

As with any political and economic changes, there are prudent steps and approaches all investors should make. Please download our guide to why keeping focused on long term financials goals is key.

Download your guide here:

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How the upcoming General Election might influence your finances?

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Investment impact

Markets often exhibit volatility around general elections, especially if results are unexpected. However, from a stock market perspective, the outcome of this general election is unlikely to have a significant impact, as many financial organisations have already accounted for a potential Labour win.

While the stock market may fluctuate briefly before and after the election, history suggests that markets typically stabilise in the following months. For instance, after the 2010 general election, which resulted in a hung parliament, the FTSE All-Share index fell by 3% but quickly recovered once a coalition government was announced. Six months later, the index was up nearly 10%.

Individual Savings Accounts (ISAs) could become increasingly important for investors if further tax rises occur.

Labour has previously advocated for simplifying ISAs, while the Conservative government is currently consulting on the “British ISA.” A change in government might lead to the end of this initiative.

The annuity market has been strong recently, driven by high interest rates. However, with a general election now on the horizon, the likelihood of a rate cut this summer diminishes, suggesting that annuity rates may remain elevated for longer.

Taking a long-term outlook

Investors should prioritise their long-term strategy and goals rather than reacting to short-term political events. A buy-and-hold approach focusing on funds and shares with strong underlying businesses can help avoid missing out on long-term gains.

Diversification across various asset classes and currencies is crucial. By spreading investments across different assets with varying levels of risk, investors can mitigate the impact of a downturn in any particular market or sector.

Additionally, maintaining a cash reserve during times of uncertainty can provide the flexibility needed to respond to new information as it becomes available. Volatility often presents opportunities, so investors need to avoid making knee-jerk decisions.

If you’d like to discuss your financial future and how the election may impact your finances, get in touch:

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Meet our Client Research Manager: Julia Fisher

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Julia’s team of technical Paraplanners look at all the information provided by your adviser and conduct comprehensive research so we can provide the most suitable recommendations to you.

If you’d like to know more about Julia and how her team support our clients, take a look at our team page: https://www.ellisbates.com/paraplanning-team/ 

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What could the General Election mean for your finances?

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If you would like to discuss your financial future and the impact of the election on your financial planning, please get in touch:

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Meet our Director of Financial Planning: Ben Clapham

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“I am passionate about helping individuals, families and business owners with their financial planning and my approach is to very much to take a holistic view of your financial situation in its entirety and then to fully understand where you want to be and what you want to achieve.

Working together to ensure you are financially well organised, I use sophisticated cashflow modelling software to help you develop lifetime financial plans and to bring your financial future to life.”

– Ben Clapham, Director of Financial Planning

If you’d like to know more about Ben and how our team of advisers can support you with your financial goals, take a look at his profile:

Ben Clapham

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How might the General Election influence your pension planning?

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Pension Lifetime Allowance reintroduced

Labour has announced plans to reintroduce the pension lifetime allowance, which limits the amount you can save into a pension without facing tax penalties. Previously, the allowance imposed a tax charge of up to 55% on total pension savings beyond £1,073,100.

Although the government abolished the allowance in 2023, Labour leader Sir Keir Starmer said he is “absolutely committed” to reversing this decision.

If reinstated, savers with large pension pots could again face tax charges if their savings exceed the £1,073,100 million threshold. The Conservatives have not clearly stated their plans regarding the lifetime allowance, but having abolished the cap only last year, there’s no indication they intend to reverse their decision.

The abolition aimed to encourage high-earning older workers to remain in the workforce amid concerns over the number of over-50s leaving. Commentators have suggested that reversing the decision now would be unwise. While attractive politically, reinstating the lifetime allowance poses significant practical challenges and risks. It could lead to early retirements among those with large defined benefit pensions, especially in the public sector, or prompt early withdrawals from large defined contribution pensions.

Labour is reportedly exploring ways to reintroduce the pension lifetime allowance without deterring senior public sector workers from continuing in their roles.

Triple-lock pensions commitment

Another key issue regarding pensions is the triple-lock system. The triple-lock ensures that the state pension rises yearly in line with inflation, average earnings growth, or 2.5%—whichever is highest. The Conservatives have outlined plans to increase the tax-free allowance for pensioners in line with the existing “triple lock” to ensure it rises yearly.

It would mean the state pension and retirees’ tax-free allowance – currently £12,570 – would increase in line with inflation, average earnings, or 2.5%, whichever is highest.

Labour has committed to retaining this scheme for the next parliament but has declined to match the latest Conservative pledge. Labour’s shadow Paymaster General Jonathan Ashworth said the announcement was “just another desperate move from a chaotic Tory party torching any remaining facade of its claims to economic credibility”.

The full new state pension is worth £221.20 per week or £11,542 per year. Tax thresholds are currently frozen until 2028, which means that if the full new state pension keeps rising from its current level, many pensioners who rely on it as their only income could end up being above the threshold and having to pay income tax.

However, the next government may consider increasing the state pension age sooner than planned. The age is already set to rise from 66 to 67 by 2028 and to 68 by 2046, but this timeline could be accelerated.

The state pension remains a crucial income source for retirees but is increasingly costly to maintain. With an ageing population, the number of pensioners is expected to grow by 25% by 2050. The cost of the state pension has risen from 2% of national income in 1948 to around 5% today and is projected to reach 6.4% by 2050.

If you’d like to know more about how the General Election could impact your financial plans, download our free Election 2024 Guide:

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What to consider when investing during an election

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What are the fundamentals for successful investing during the time of a general election?

Utilise tax-efficient allowances

Since 6 April, savers and investors have had a more flexible approach to using their Individual Savings account (ISA) allowance. For the first time, individuals can now open multiple accounts of the same type of ISA within a single tax year, from 6 April one year to 5 April the next, provided they do not exceed the annual ISA allowance limit. This marks a departure from previous rules, which annually restricted savers to one account per ISA type.

Your ISA allowance resets annually on 6 April. For the current 2024/25 tax year, this limit is £20,000 for each adult. Investments within an ISA grow tax-efficiently, allowing more of your money to contribute towards your future goals.

Cash ISAs are a cornerstone for risk-averse savers, providing a straightforward, tax-efficient haven for cash savings. Cash ISA products can be easy-access accounts that allow immediate withdrawals or fixed- rate accounts that reward savers for committing their funds for a predefined period. Although these accounts can offer both higher and lower interest rates, they typically offer lower interest rates than standard savings accounts. Therefore, they present a valuable tax shield, especially for those who have maximised their savings allowance or anticipate doing so.

Stocks & Shares ISAs, sometimes referred to as ‘investment ISAs’, present an opportunity for individuals to diversify their investment portfolio across a broad spectrum, including collective investment funds, Exchange Traded Funds (ETFs), investment trusts, gilts, bonds, and stocks and shares. This form of investment carries an inherent risk since the value can fluctuate significantly; however, historically, the stock market has offered returns that surpass those of traditional savings accounts over extended periods.

Lifetime ISAs present a unique opportunity for individuals aged between 18 and 40, potentially benefiting your children or grandchildren. For each pound deposited into the account, the government offers an additional 25p, tax- free. With an annual contribution limit of £4,000, savers can receive a maximum bonus of £1,000 annually. This fund can be used to purchase a first home worth

up to £450,000 or for retirement savings, functioning similarly to a pension scheme. It is important to note that funds can be freely accessed after the age of 60 to supplement retirement income. However, early withdrawals for other purposes incur a 25% penalty.

Junior ISAs are designed for individuals under the age of 18. This financial year allows for an investment of up to £9,000 in either cash or stocks and shares. Fund access is restricted until the beneficiary turns 18, at this point, full control over the account is granted. From the age of 16, they can manage the account, making it an ideal option for those looking to foster financial independence in their youth. From the start of this 2024/25 tax year, the minimum age to open a Cash ISA increased to 18.

Embrace discipline over emotion

Investing can stir emotions, making discipline paramount. Don’t allow fear to dictate your investment decisions. Instead, keep your eyes on your goals and adhere to your plan. The potential power of compounded returns over decades is immense if you consistently save and invest in financial markets. You may start small, but the key is to start.

In the world of investing, cashing in your investments is known as ‘being out of the market’. When you’re out of the market, you can potentially miss out on the best days for investment gains and performance.

Brace for potential hurdles

The journey of investment is seldom a smooth ride. As evidenced in recent years and with the general election looming, there will be instances when markets may take a downturn or your investments don’t perform as expected. Foreseeing these obstacles and having a contingency plan to manage them effectively is crucial. Even if you’re a novice investor, you’re likely aware of the market’s volatility. Where there’s a chance for profit, there’s also a risk of loss. High-risk investments may yield higher returns, but if you’re susceptible to worry or feel inclined to pull out your investment following a loss, a lower- risk investment might suit you better.

Investment strategies aren’t one-size-fits-all, so don’t be discouraged if your method differs from others. Always tailor your goals and investment amounts to what makes you feel at ease.

Establish a time horizon

A crucial component of investment strategy is setting a defined time horizon for your investments. For example, if your goal is to build a retirement nest egg, your investment period will likely be more extended than that of someone investing in their child’s higher education.

Although it’s generally possible to liquidate your investments whenever you want, maintaining a presence in the market often enhances your prospects for greater returns.

It also allows for compound growth when you reinvest dividends or interest. Investments should last at least five years, but ten years or longer is preferable. The determination of this period will hinge on how much you can afford to invest on a monthly or yearly basis to meet your financial objectives. Also, evaluating whether there’s sufficient time for your investment to mature and withstand potential market volatility is important.

Obtain professional guidance

Professional financial advice is essential to construct a diversified portfolio. We are dedicated to assisting you in creating, managing and growing your investment portfolio while maintaining an acceptable level of investment risk.

We take a holistic approach, considering every facet of your life. This includes your personal goals and dreams, as well as the aspirations of your extended family. We also think about the legacy you wish to leave behind. Our comprehensive approach ensures that your portfolio is not just about numbers but reflects your life’s journey and future ambitions.

if you’d like to speak to us about your investments, please get in touch:

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