Pre Summer Update

Well I hope this missive finds you well. I don’t know what the weather has been doing so far this year but I hope it starts sorting itself out soon.

As you know, I try not to send these out at a set frequency as I am very conscious that I want to try and write about things that are useful that you will want to read about and not simply send regular ‘content’.

I have been busy in the wings working on a number of developments. Firstly, I have created a new ‘Ready for Retirement’ scorecard which you can find here. This will test how you feel about your plans for retirement (even if you are already retired) and will give you a red, amber or green status. Please feel free to have a go and to share it far and wide!

I will share the other developments as they come online but I am looking at a number of new systems with the goal to try and make things simpler and clearer.

I have also been doing some housekeeping with the Client Service Agreement and have managed to trim about four pages from it although doubt I will realise my dream of getting it down to two sides of A4. I need to issue all my existing clients with the new agreement. There are no significant changes to the terms or conditions and I have attached the new document. Please would you mind replying to this email to say ‘I confirm I have read and accept the new Client Service Agreement’. That will save me felling a tree to have each of you sign a new printed copy at our next review.

There have been some welcome changes to the ISA rules, which allow you to make payments to more than one ISA in the same tax year or do partial transfers multiple times in the same year. The requirement to re-apply annually has also been removed. No word yet on the British ISA and how this will work in practice, although the product providers I have spoken with have been quite cynical about this and view it as a gimmick.

We are now in the thick of the changes to the Lifetime Allowance with the introduction of the new Lump Sum Allowance and Lump Sum Death Benefit Allowance. I don’t want to put you to sleep by repeating it all here but you will be pleased to know I have sat through several seminars on the topic. Suffice it to say that it presents potential new opportunities to take more Tax Free Cash for those already retired in recent years, especially those retiring from Defined Benefit (commonly known as Final Salary) schemes. Anyone planning to retire within the next few years will be well advised to take advice to avoid missing a trick.

I have heard there has been a rush by some to get the Tax Free Cash out of their pensions in anticipation of a potential Labour Government. I was speaking to the head of public policy at a major investment house who had recently met with the shadow Chancellor who apparently said they are looking to make changes but to also ‘simplify things’. I have to say that will be a first for a Labour chancellor when it comes to pensions (I still shudder about Gordon Brown’s anti-forestalling rules for pension contributions – look it up if you are having trouble sleeping).

Turning to the upcoming election on 4 July. The polls were pointing to a Labour majority but that was before Nigel Farage entered the fray. Suspect there will be many twists and turns yet but as things stand it seems Sunak will be on his private jet to California by 5pm on 5 July. 

From an investment perspective there is a mountain of past evidence which indicates that the investment markets do not really care who is in power and will carry on regardless, so I am not particularly concerned about the effects on portfolios and nor should you be. There might be some extra volatility in the gilt market if Sir Keir wins and decides to go on a spending spree. It will all come out in the wash over time as it has always done.

I am hopeful that with the recent good news on lowering inflation, we should be expecting some interest rate cuts from the Bank of England this year. I expect Bailey will be under severe pressure to begin cutting before the election, although I suspect like most technocrats he will resist easing his grip on this lever of power until the US or EU goes first.

Markets have been very good over the last six months on the back of expectations of interest rates being cut amongst other things. We have also been seeing better than expected numbers for growth on the economy with fears of recession falling away.

One plus side of the cut in interest rates is we expect there to be a recovery in bond values as rates start moving downward and it should also be a positive tailwind for investment portfolios. As I have said in previous editions it does not make sense in the long term to hold onto far more cash than you plan to spend in the next 5 years, so with cash rates expected to fall over the coming years it would be sensible to review your cash options.

As you have come to expect, I will be keeping a keen eye on developments and I am sure I will be writing again as the year progresses.

As always please do let me know if you have any questions or if you enjoyed this update.