Finance

Investing during the time of a General Election

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Set and prioritise your financial objectives

Your investment journey requires a clear plan, which includes understanding your unique goals and the strategies to achieve them.

Are you investing for a specific purpose? Do you aim for investment growth, income, or both? Having a well-defined plan prevents deviation and ensures your decisions align with your investment goals.

Remember, there’s no universal approach to achieving financial objectives. Your goals should reflect your individual circumstances, preferences and ambitions. By identifying and prioritising your financial objectives, you can concentrate on what’s most important in a sequence that suits you. This step also guides you in making necessary compromises.

Ensure smooth portfolio performance

Investing doesn’t necessitate a large initial sum. Drip-feeding an affordable amount each month – or gradually depleting a lump sum – can be advantageous in times of geopolitical, stock market and economic uncertainty. Known as pound cost averaging, this can offer a safeguard against value depreciation in markets that inherently have the propensity to decline and ascend.

Rather than committing a substantial amount of money at a single market point, which a price drop could potentially follow, regular investments would purchase units as the prices of the underlying assets decrease. This could lead to obtaining more units for your capital, resulting in a higher return if the market situation becomes favourable and prices start rising.

Diversify your portfolio

‘Don’t put all your eggs in one basket’ is sage advice when investing.

Diversification spreads risk across various investments and sectors, helping you navigate market volatility. Asset allocation and diversification allow
you to create an investment mix with potential for growth and a level of risk that suits your comfort zone.

In a diversified portfolio, the less correlated the assets, the better. The concept is straightforward: if you invest everything in one sector – like technology – and it plummets due to regulatory changes, your investment suffers too.

Regularly review your portfolio

Monitoring your investment portfolio ensures it aligns with your financial objectives and you’re not excessively exposed to risks. Rebalancing is an essential practice in this process. It involves adjusting the allocations of different assets within your portfolio to maintain the ‘weight’ or proportion that best matches your initial investment goal.

Market performance can cause the value of each holding in your portfolio to rise or fall over time, altering its proportion within the overall portfolio. As these proportions deviate from their original weightings, the risk profile of your portfolio changes accordingly.

High-return assets typically carry higher risk, meaning these high-risk investments may increasingly dominate your portfolio over extended periods, elevating your risk level beyond your initial plan.

Practise the art of patience

Long-term investment goals require ample patience. While prices fluctuate daily, adopting a buy-and-hold strategy is crucial. Avoid attempting to time the market or base decisions on short-term fluctuations. Market timing – predicting changes in stock prices or index values – often leads to poor decision-making.

Instead, focus on your overall investment goals and adhere to your plan. As many investors say, ‘There are only two types of people when it comes to market timing: those who can’t do it, and those who haven’t realised they can’t.’ If you’re patient enough to ignore the noise, the market will eventually recognise an asset’s underlying value.

If you’d like to know more about how the general election could impact your finances and investments, download our free election guide:

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Enhancing retirement through lump sum contributions

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Contributing additional amounts to your pension stands to benefit you significantly in the long term

Recent research findings have brought to light a striking observation: fewer than 10% of adults in the UK contribute occasional lump sums to their pensions. This statistic is particularly surprising given that such contributions could significantly amplify one’s retirement savings.

Analysis reveals that even modest lump sum investments can significantly increase the overall size of one’s pension pot due to the power of compound growth over time. For example, starting with an annual salary of £25,000 and contributing the auto-enrolment minimum (5% from the employee and 3% from the employer) from age 22 could lead to a retirement fund of around £434,000 by 66.

Yet, by adding nine lump sum payments of £500 every five years from age 25 to 65, you could enhance your retirement savings by an additional £11,000. Those capable of making heftier contributions, such as £5,000 every five years, could see their pension pot grow to £549,000, which is £115,000 more than without any lump sum additions, not accounting for inflation.

Value of forward-thinking financial decisions

Encountering unexpected financial windfalls, whether through bonuses, gifts or other means, often tempts immediate expenditure. Currently, many are directing these extra funds towards managing monthly expenses. However, those who are financially able to contribute additional amounts to their pension stand to benefit significantly in the long term.

Pensions offer tax efficiency and the potential to outpace both inflation and interest rates on savings accounts, making them a wise choice for securing one’s financial future. With the end of the fiscal year having passed, and with it the expectation of annual bonuses for many, allocating a portion of this windfall towards a pension could substantially impact your retirement lifestyle.

Role of employers and providers in future planning

Employers and pension providers play a crucial role in educating individuals about the importance of long-term financial planning. It is essential to illustrate how pensions fit within a broader financial context, ensuring individuals perceive retirement savings as a key component of their overall financial strategy.

These efforts can empower individuals with the knowledge and resources needed to make informed decisions about their financial future, fostering a proactive engagement and planning culture.

If you’d like to discuss your financial future, please get in touch with us:

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Source data:

[1] Boxclever conducted research for Standard Life among 6,350 UK adults. Fieldwork was conducted 26 July–9 August 2023. Data was weighted post-fieldwork to ensure the data remained nationally representative on key demographics.

[2] Calculations assume the following: Starting salary £25,000 – Employer contributions 3.00% – Employee contributions 5.00% – Investment growth 5.00% – Salary growth 3.50% – Annual investment costs 1.00%

 

Meet the Financial Adviser: Amy Burge

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“My approach is to very much understand your financial goals, both for you and your family, and to work closely with you to put the plans in place to help you achieve these goals.

Everyone’s goals are different and for example you may be looking to better understand when you can retire, how to retire early, how to pass on your estate in a tax efficient way to your loved ones, how to help your children or grand children financially, how to plan for your retirement or how to start an investment portfolio.“

– Amy Burge Financial Planner

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2024 Election Guide

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Prime Minister Rishi Sunak has announced that the next general election will take place on Thursday, July 4.

This announcement ends months of speculation about the election date.

We have produced a 2024 Election Guide covering the key areas for you to consider with any potential changes in Government policy

To download your free guide please fill out your details below:

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Meet our Head of Pensions: Nigel Swan

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“My aim is to make matters both understandable and relevant to my clients, ensuring their financial knowledge improves significantly throughout the planning journey. I hold regular reviews with my clients, to keep abreast of any changes in circumstances or new financial goals they may wish to work towards.”

– Nigel Swan, Regional Director & Head of Pensions

If you’d like to know more about Nigel and how his team can support you with your pensions, take a look at his Profile Here

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Meet the Financial Adviser: Colin Welsh

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“I understand how important it is to listen in order to understand your needs and firmly believe in building strong and long-lasting relationships to achieve the best possible financial outcomes for my clients.

I take great pride in delivering expert and qualified advice on a wide range of financial planning areas including investments, tax planning, pensions, inheritance tax planning, retirement planning, insurance and protection and estate planning. My goal is to enable you to achieve your financial dreams and goals – be they medium or long term, for both you and your family.”

– Colin Welsh, Chartered Financial Planner

If you’d like to know more about Colin and how he can support you with your financial goals, take a look at his Profile Here

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Create personalised, tailored financial plans

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Ellis Bates Directors Ben and Alan discuss how Ellis Bates incorporate the principles of Consumer Duty into every aspect of our client responsibility to offer relevant and effective products and services.

Watch our latest video to find out:

How the Ellis Bates in-house Investment Team help you create your personalised, tailored financial plans
How Ellis Bates independently select the products and services individually tailored to your financial plans
How Ellis Bates tailor the right financial products and services throughout your lifetime and its ever-changing circumstances
How Ellis Bates scan the whole of marketplace to carefully select the right products and services for you to achieve your financial plans
How the Ellis Bates in-house investment team create a suite of products and services geared specifically to your financial plans

If you’d like to discuss your financial plans, please get in touch:

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Free Guide: Making the most of your money

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Wealth planning isn’t a one-time event. It involves comprehensively evaluating your current and future financial state regularly to formulate and evolve a plan to help meet your financial goals.

We have produced a free guide to making the most of your money to help you at every stage of your financial journey: Download here

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Your financial planning future all on one page

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Ellis Bates Directors Ben and Alan discuss how Ellis Bates incorporates the principles of Consumer Duty into every aspect of our responsibility to ensure clients are on track with their financial planning.

Watch our latest video to find out:

How Ellis Bates can show you your financial planning future all on one page
How you can get the interactive power of cash flow modelling behind your financial planning
How to uncover and mitigate shortfalls in planning your financial future
How Ellis Bates will keep you on track with your financial planning

If you’d like to discuss your financial future, please get in touch:

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Financial commitments and pension planning

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A Delicate Balance 

Financial commitments and pension planning 

The challenge of managing bills and other financial obligations while simultaneously saving for a pension may seem daunting. However, it is certainly achievable with the right planning and timely action. The sooner you start, the more advantageous it could be if you contribute to a defined contribution pension. 

This is a type of pension where the amount you receive when you retire depends on how much you put in and how much this money grows. Your pension pot is built from your contributions and employer’s contributions (if applicable), plus investment returns and tax relief. 

Here are 6 practical strategies you can consider 

Utilising Salary Increases for Pension Contributions

Let’s begin with a straightforward approach if you find contributing as much as you’d like to your pension challenging. Initially, contribute an amount you can comfortably afford. Then, whenever you receive a salary increase, allocate a portion of it directly into your pension. This method ensures that you do not become accustomed to spending the additional income while still benefiting from the pay rise. 

Maximising Employer Contributions 

Many employers offer to increase their contributions if you decide to increase yours (up to a certain limit). Therefore, by contributing an extra per cent or two of your salary, they might also contribute more. It would be beneficial to inquire about your employer’s pension contribution policy. 

Boosting your Pension with Lump Sum Payments 

If you encounter a windfall, consider making a lump sum payment into your pension. This is a quick and effortless way to enhance your pension fund. As with regular contributions, the government will top up lump sum payments with tax relief (subject to certain limits). 

Delaying Access to Your Pension Pot 

Allowing your pension to remain untouched for an extended period can potentially lead to its growth. Leaving your pension invested for a few more years could make a substantial difference if you’ve had your pension for a while. However, it’s crucial to remember that there’s no guarantee of growth as investments can fluctuate. 

Being Selective with your Investment Choices 

Your investment choices for your pension can significantly influence your returns at retirement. For example, your scheme’s ‘default’ investment option may not be the most suitable for you. Therefore, it’s worth examining the investment funds where your money is placed. 

The process of making changes to your pension will vary depending on the type of scheme you have. With many modern schemes, alterations can be made online with just a few clicks. Check your policy information or speak to your employer for further details.  

Investing more when regular expenditure ends 

A similar strategy can be employed when you’ve completed regular payments. For instance, once a car loan is fully paid off, consider redirecting the freed-up funds into your pension plan. Even modest increases like these can yield significant results over time. Plus, should you need to reduce your outgoings in the future, it’s typically possible to decrease your contributions.

If you’d like to discuss your pensions with a professional Financial Adviser, please get in touch:

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