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Retirement Planning

Retirement Planning – will you have enough income in retirement?

 

This is a big subject and an important one for those of you that want to have an enjoyable retirement when you have the time to enjoy your retirement you need to have the right resources too.

The shape of retirement is changing, when I started advising the focus was generally on building funds to buy a guaranteed income – an annuity, normally after drawing tax free cash.  If you were lucky you had well-funded company pension provision.  Inevitably you retired on a set date, age 65 for example.

Nowadays retirement is far more flexible.  Sometimes people chose to draw pension benefits early without retiring.  Many people carry on working either full time or part time well after their (normal?) retirement date.  Unfortunately, for many, this is a financial necessity.  For others, they work on for their own reasons.

Why would you work on after your ‘perceived’ normal retirement age?  Some of the benefits could be as follows:

  • To maintain good mental health
  • To maintain good physical health and strength
  • Higher levels of income
  • To build additional assets for retirement
  • A gradual phasing into retirement
  • Better for your long-term relationship (no break up from your spouse or partner)
  • To avoid babysitting or carer duties

Reading this back I might be a little biased.  I have plenty of clients that look forward to retirement and enjoy a full and active retirement.  Some people don’t know how they had time for work!

Ideally when you do retire you will have good levels of assets and pension income to sustain you in the lifestyle that you want.  To get to this position takes years of careful planning.  You need to be focused on building your assets and preparing to be tax efficient in retirement.

How do you do this?  Seek independent financial advice early.  The longer you have to plan generally the more tax efficient and better off you can be in retirement.  Don’t wait until it’s too late – be in a position when you decide when you want to retire!

 

Steve Speed

30/05/2019

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Ongoing Market Volatility

Ongoing Market Volatility

Markets have returned to normal volatility over the last 14 months.  We are experiencing a lot more volatility than 2017 as this was a surprisingly strange year, good investment returns across most assets and regions and very low levels of volatility.  The global political backdrop is interesting for markets.

Volatility is not an issue for the long-term investor, you need to be in real growth assets for good long-term returns.  Short term volatility, for the majority, should not concern you unless you are drawing an income or about to draw an income.

Market research has been conducted about investors trying to time the markets, this is exceptionally difficult, and I don’t know anybody that can do this consistently.  Goldman Sachs have recently (2019) published some of this research.  Over the 20 year period from 1999 to 2018 if you stay invested (MSCI World Net TR Index) you would average 7.2% per annum investment return.

If you had been trying to time the markets and missed the 10 best days (these normally occur after a market drop) in the same index your average investment return would have fallen to 1.7% per annum.

What else can you do but remain invested in markets that are typically volatile?  You should be well diversified by assets and geography.  Preferably with ongoing active and tactical management of your investments.  For example, a Multi Asset Manager or a Discretionary Fund Manager can give you both active and tactical management.

Examples of the above active and tactical management fund managers are Prudential, Tatton, SEI, Royal London and Brewin Dolphin.

At People and Business IFA we compare and contrast fund managers and investment propositions, as we want our clients to have the best investment option to suit their needs, risk profiles and objectives at a reasonable cost for the specific investment proposition.

Just a quick word on cash, this is not a viable long term investment.  Inflation will erode the buying power of your capital over the medium to long term.  Cash could be used for diversification or short-term capital, known expenditure and emergency fund requirements.

As you become more experienced as investors you will be less concerned about market volatility and leave your investments to grow.  They should be reviewed annually for you and their suitability, your attitude to risk and capacity for loss confirmed.  At People and Business IFA we provide regular face to face annual reviews and updates as part of our ongoing service

If you are concerned about market volatility and your existing investments or investing, please phone to discuss.

 

Steve Speed 25/04/2019

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Investment Update

Investment Update

Goodbye 2018 Hello 2019!

For those invested for long term growth and fully invested for retirement income (Pension Drawdown) you will have probably experienced the heightened volatility in investments this year.  The higher your equity content the higher your volatility.

Following circa nine years of good growth and the great growth year we had in 2017 across the world, this year could have been a shock to the system and a reminder that volatility is normal when you invest for the medium to long term.

Investment returns for this calendar year (2018) have been nominal if not a loss unless you are in a specialist or multi asset investment.

Views for 2019 vary.  Some commentators (J P Morgan for example) tell us that the recession risk is rising over the next three years.  Invesco Perpetual tell us that we should consider eight key risks.  The highest risk being the Geo Political risk.  Trump, trade wars and the political risks arising from Trump’s domestic political situation.  Brexit and Europe get a mention in commentary on political risks too.

More positive views for 2019 come from Tatton and Prudential.  Tatton believe we will see ongoing volatility, but the risk has been factored into equity markets at too higher level.  Not all equity markets are good value though.  Prudential, managers of substantial multi asset funds, also had a fairly positive view in early December.  This may be because of their multi asset fund management skills and experience.  Prudential do tend to take the view of long-term investors (quite rightly too).

To summarise I don’t think 2019 will be an easy year for investors but you need to remain in real growth assets to benefit from investment returns over the long term.  If you are approaching the time you want to access your investment or draw pension benefits you might consider reducing your risk.  This is a finely balanced decision and advice should be sought.

On a positive note 2019 sounds like it might be a better year for investments than 2018.  Please note that we can experience shocks to the market and that the opinions shown above are only forecasts.  The world is quite difficult to read now.

Have a Merry Christmas and a happy, healthy and prosperous New Year!

 

 

Steve Speed

17/12/2018

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Brexit Blog

Brexit update by Tatton Investments 2nd November 2018

Below is an update of Tatton’s view of the issues around Brexit. It is their view but we subscribe to the contents. Please read at your leisure and contact me if you wish to discuss. Regards, Steve.

 

Brexit, the biggest decision made by the British in recent history steps ever closer to reality, March 2019 when Britain is no longer a member of the EU. Dominic Raab, Secretary of State for Exiting the European Union, implied this week that he was confident of a deal by November 21, only to backtrack to what has become the now standard ‘no progress’ negotiating position of the UK Government and the EU. This ‘nearly there, but no change’ and little detail on what has actually been negotiated led to 700,000 people marching in London and a seeming endless bickering between the politicians on all sides.

Against this – for many – unnerving backdrop of apparent lack of real progress on negotiations, we thought it time to provide investors with an update on our thoughts regarding Brexit and the impact on your investments.

It seems likely, even with a deal, that there will be, or agreed that there can be, an extension of transition periods and a temporary continuation of the customs union to prevent trade disruptions. This very EU like fudge, with a more benign rather than negative public position from both sides, has pushed a definitive decision far enough away to not cause an immediate crisis.

The UK and the EU are apparently locked in this nerve-wracking (certainly for the public) standoff.  This, coupled with the seeming unwillingness of the opposing political sides within the UK’s political leadership and parliament to break ground and commit to a policy makes me suspect that we are witnessing deliberate rather than situational brinkmanship on the side of the government. The more to the wire negotiations appear and the later Theresa May’s team presents any form of Brexit deal, the less the time, opportunity and public support for those who prefer chaos to pragmatic compromise – to agitate against it. Jeremy Corbyn controls his shadow cabinet very tightly, easier to watch the Tories self-destruct than expose his own party’s divisions on Brexit.

It seems that the weeks until year end can be expected to remain as unnerving as the weeks since the summer, which may well put renewed but temporary pressure on £-Sterling, until at the last minute the looming crisis is resolved in a nail-biting finale which both sides will hope to make the result ‘sellable’ to their respective electorates.

All this high-profile politics doesn’t alleviate any of our concerns as investment managers or your concerns as investors on how the UK’s future relationship with the EU will impact on our lives. This is, of course, understandable despite truly domestic British assets forming a relatively small section of our overall investment portfolios compared to global assets. So, with the nation still staring down the barrel of a no deal gun, it may come as a surprise then that, at Tatton, we’re relatively sanguine about the whole thing – for the time being at least.

Yes, there are thick clouds of uncertainty over the UK’s future and serious unknowns to consider. How long will this government last? Will we soon have another election or even referendum? What options would such a referendum even pose? And that’s just the short term; the shape of Britain’s long-term arrangement with the EU is even more uncertain.

There are certain things we can be fairly confident about. The most important of these is that, while March 2019’s official exit will undoubtedly be a significant milestone, it’s unlikely to see too many changes to the actual business environment. A transitional period and a BRINO (Brexit in name only) for the near future, without a solid long-term agreement, are the most likely outcomes for next year.

The fact that the October deadline for an agreement was missed all but confirms this in our eyes. Put simply, there is no way to have a substantial breakaway from European laws in five months’ time without significant damage to both British and (to a somewhat lesser extent) European economies. While many businesses have contingencies for the various strengths of Brexit, such a sudden shift would force them into a difficult position. This is something that politicians and electorates on both sides couldn’t abide. Unlike the longer-term arrangements, this could be easily avoided without too much complication or loss of face.

As strange is it may sound, we think this is especially true considering the weakness of politicians on all sides. Rarely do you get aggressive or far-reaching decisions with weak leadership. At home, Theresa May’s minority government faces both internal and external opposition. While some of this is pushing her towards a harder Brexit, a larger proportion is pushing her the other way. In Germany, the Merkel era looks shaky and now even has an end date. General Eurosceptic sentiment across the continent is pushing national governments and even Brusselite technocrats away from causing a pan-European economic upset for the sake of proving the supremacy and integrity of the remaining EU27.

All this points to a continuation of the Brexit muddle-through in the short term. During that time, the UK should be able to take full advantage of EU member status with the added bonus of a low-valued currency. A lower £-Sterling price gives exporters and advantage that has boosted the British economy and gone some way to redressing its underlying structural issues. So long as this continues and demand from Europe doesn’t fall off too dramatically, we see a relatively good picture for the UK in 2019.

We must, however, tinge this rosy picture with a fair dose of caution. Economically, Britain is in a fragile balance. Recent inflation data suggests that even modest growth is likely to generate inflation pressures. Combined with continued weakness in the housing market, this has given the Bank of England a serious headache on whether to raise rates more aggressively in case £-Sterling came under undue pressure – and risk choking off the economic activity – or hold back – and risk inflation getting out of hand.

Politically, things are equally fragile. British politics has three main Brexit camps who all have a fair chance of being in power in a few months’ time: The Labour Party, who are pushing for a Brexit lite; the Johnson/Rees-Mogg axis of the Tory party, under whom a hard Brexit looks fairly certain; and Theresa May’s unassuming band of Tory MPs, who are not overly keen on Brexit but will have to seek re-nomination from a Tory membership which appears firmly pro-Brexit. Given that market expectations for the UK are almost directly correlated to the expected strength of Brexit, the one comforting part of this balance is that two out of three of those options avoid a damaging hard Brexit.

On the continent, things are much the same. European electorates would prefer the UK to remain but, as the exit is inevitable, businesses (in particular) just want the outcome that leads to least disruption. The Eurocrats in Brussels are ideologically opposed to Brexit and have shown in the past, with Greece and Italy, that they’re willing to forgo easy solutions for the sake of purity. On the whole, the national governments are somewhere in the middle

The difference here however is that, while Europhobic Tory backbenchers are noisy, they aren’t in control. The Eurocrats – who combine their technocratic management style with a dogmatism usually reserved for more extreme ideologues – are. As ever in European politics, this makes easy solutions more difficult.

But even the self-styled protectors of the European project are ultimately subordinate to national leaders. If the economic threat to electorates is big enough, national leaders will put enough pressure on Brussels to make a deal. As yet they have not applied real pressure on the Eurocrats to make a deal happen.

When they do, this could well lead to an arrangement somewhere between a Switzerland/Norway model deal or (in a worst-case scenario) a Canada-plus. None of these trade models with the EU are likely to be as good or better than full membership, but then this may be the price to pay for increased levels of sovereignty and being able to negotiate free trade deals with other global regions on our own.

To use Theresa May’s words, “not a walk in the park”, but “not the end of the world either” is what we would expect as a worst case for March 2019.

What does this mean for our allocations and your investments? In our assessment, the shunned £-Sterling and UK stocks are currently lower valued than the medium-term outlook justifies, which is why we removed the previous UK underweight from portfolios in August. You should remember that we allocate globally and so our view on the UK is in terms of how we can best position your investments, not what we want out of Brexit. On that basis, Brexit becomes less of our immediate focus, because the levers of Trump, China are having more significant effects globally, and that is where most of your portfolio holdings are doing their business and thus where we seek to generate returns.

Please talk to Steve to see our monthly or quarterly portfolio factsheets which contain detailed breakdowns of our allocations. We frequently write about Brexit in the Tatton Weekly which you can subscribe, through your adviser, if you would like to know more about our ongoing research and investment thinking.

 

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Market Volatility – October 2018

Market Volatility – October 2018

Depending on how you are invested with your pension and/or investments, you may have noticed the volatility in the markets over the last few days.  We saw a significant drop in some asset values in the week ending 12th October.

Heightened volatility has been experienced since February this year.  It is expected now but the consensus view from fund managers is still for growth in 2018 and 2019 but with continued volatility.  We could experience shocks to the market.

I recently attended an Invesco Perpetual Investment Intelligence seminar and the main risk focused on was Geo Politics.  Whilst we hear a lot of media noise about Brexit, Trump is likely to be the bigger political risk.

Trump may just be posturing to the home crowd for the Mid Terms and hopefully normal service (normal Trump!) will be resumed shortly.

For most investors, we should ignore the short-term volatility and focus on the long term.  The majority of investments used are ‘active’ funds with fund managers taking account of the changing market outlook.  In addition, we also use investment propositions that have strategic and tactical management that invest appropriately, within a given risk profile, for the markets.

A key message for investors is to keep calm and carry on!

 

 

Steve Speed

19/10/2018

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Don’t let a scammer enjoy your retirement – beware of fraudsters

There is seldom a week goes by without hearing that a large, well-known firm has been hit by hackers; the latest one was British Airways. You have probably seen the TV adverts warning of the dangers of retirement plans being ruined by fraudsters.

The Financial Conduct Authority (FCA), our industry regulator, recently published an online article designed to highlight the dangers and suggest how to protect yourself from fraudsters. We’ve lifted the advice from their article.

 

Four simple steps to protect yourself from pension scams

Reject unexpected offers

If you’re contacted out of the blue about your pension, chances are it’s high risk or a scam. Be wary of free pension review offers. A free offer out of the blue from a company you have not dealt with before is probably a scam. Fortunately, research shows that 95% of unexpected pension offers are rejected.

Check who you’re dealing with

Check the Financial Services Register (www.register.fca.org.uk) to make sure that anyone offering you advice or other financial services is FCA-authorised.

If you don’t use an FCA-authorised firm, you also won’t have access to the Financial Ombudsman Service or the Financial Services Compensation Scheme. So you’re unlikely to get your money back if things go wrong. If the firm is on the FCA Register, you should call the Consumer Helpline on 0800 111 6768 to check the firm is permitted to give pension advice.

Beware of fraudsters pretending to be from a firm authorised by the FCA, as it could be what we call a ‘clone firm’. Use the contact details provided on the FCA Register, not the details they give you.

Don’t be rushed or pressured.

Take your time to make all the checks you need – even if this means turning down an “amazing deal”.

Be wary of promised returns that sound too good to be true and don’t be rushed or pressured into making a decision.

Get impartial information and advice

The Pensions Advisory Service (www.thepensionsadvisoryservice.org.uk) – Provides free independent and impartial information and guidance.

Pension Wise (www.pensionwise.gov.uk) – If you’re over 50 and have a defined contribution (DC) pension, Pension Wise offers pre-booked appointments to talk through your retirement options.

Financial advisers – It’s important you make the best decision for your own personal circumstances, so you should seriously consider using the services of a financial adviser. If you do opt for an adviser, be sure to use one that is regulated by the FCA and never take investment advice from the company that contacted you or an adviser they suggest, as this may be part of the scam.

 

To read the full article, go to www.fca.org.uk/scamsmart/how-avoid-pension-scams.

If you have any doubts about someone contacting you about your finances, get in touch with us to discuss.

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Investment Update Prudential

Investment Update

We had a meeting in our offices yesterday afternoon with Prudential, one of the biggest multi asset fund managers in the world.  Their Investment Director Andy Brown came to discuss their unique smoothed multi asset investment proposition.

It was useful to get 1 to 1 input on the fund management of this multi asset proposition and their current views on markets and where we are in the market cycle.

In line with the consensus view, Prudential think that 2018 will be a year for growth on invested assets generally but with heightened volatility. They also think that we are in the late phase of a bull market and are carefully watching leading economic indicators for any signs that we are entering a bear market.

The Prudential are looking to reduce volatility in their underlying investments, particularly in PruFund Growth, and deliver investment returns in any part of the market cycle, through the use of alternative investments.

They are focused on long term investing and this is how we should view our investments too, over the long term.  Whether or not we have the benefit of ‘smoothing’ in a volatile market we need to remain focused on the long term.

The outlook and views above are as ever subject to unpredictable or ‘Black Swan’ events.

A key message is to remain invested and avoid any temptation to sell when we see volatility in market prices. You have to be invested to benefit from returns, despite volatility and market cycles.

If you wish to discuss this or any other aspect, of your finances, please contact me.

 

Steve Speed

01/03/2018

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Defined Benefit Pension Transfers – an update

Defined Benefit Pension Transfers – an update

Interest in Defined Benefit Pension Transfers has been very high over the last 18 months, largely due to the high Cash Equivalent Transfer Values offered and the flexibility available under the new ‘Freedom & Choice’ pension legislation.

Our regulator, the Financial Conduct Authority (FCA) has, as expected, taken a keen interest on these pension transfers.  We are alert to what the FCA are saying and, where appropriate, amend our procedures to reflect their comments and recommendations.

Recent press articles have also contributed to the ‘noise’ around Defined Benefit pension transfers including BHS, Carillion and the British Steel Pension Schemes. We have not advised on any of these schemes. The British Steel Pension Scheme is an unusual case with unique circumstances.  One of the key areas the FCA has been concerned with in this particular case is the fact that people did not appear to get individual advice.

We strive to offer our clients the best advice; this means advice personalised to the individual.

We have now decided it is appropriate to move away from the charging basis that we have used to date and, in line with the current regulatory and peer group discussions, we will now charge for the initial pension transfer advice, whether or not you transfer your pension. The FCA believe that this approach will remove any bias to recommend a transfer as the advice will be charged for, regardless of outcome.

For clarity, this means that we could potentially hold two meetings with you, advise you not to transfer your pension and invoice you for this advice.

In the interests of ‘Treating Customers Fairly’ we will only take this approach for new enquiries from today.  Any meetings previously booked will not be charged for on this basis as it was not our charging methodology when the enquiry was made.

Steve Speed

19/02/2018

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2017 Annual Round-up

It’s been a busy year and an interesting one from a political and market perspective.  However, the investment returns have been good and, dependent on your risk profile, you will have seen investment returns ranging from good to excellent over the last year.

Unless we see an unusual finish to the year, investors should be able to contemplate their position over the festive holidays and feel a sense of satisfaction.

You might think that, given the backdrop of political and global events, the markets have been relatively calm.  This is the case as the underlying fundamentals, low inflation, low interest rates, low unemployment and corporate earnings growth across a lot of the globe have been favourable.

One of the areas we focus on is the Budget.  This appeared to be quite well balanced and we saw no real change impacting on advice.  The Lifetime Allowance for pensions increases to £1,030,000.00 in April 2018.  A step in the right direction.

My Christmas wish is for the politicians to leave pension legislation alone.  We have seen enough legislative change recently for pensions (and most of it has been favourable) but I’d like to see the status quo maintained for stability in this area as we fund pensions for the very long term, 30, 40 or even 50 years and we need to have faith in pension legislation to give us confidence to fund for the long term and to be able to plan our retirement.

The consensus outlook for 2018 (I’ve been doing the rounds in seminars listening to economists, fund managers and strategists), is for growth but with higher volatility.  This again is based on strong underlying global fundamentals.  Investment returns are not likely to be as good as for 2017 but they should be fair.

We are obviously subject to shocks in the market (as ever) and this could impact your investment returns if we suffer a significant setback.

Let’s hope we have a peaceful 2018 with less war, conflict and terrorism.

Merry Christmas and a Happy, Prosperous New Year!

Steve Speed

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Protecting your data – Cyber Essentials accreditation

Cyber Essentials logo

Protecting your data – Cyber Essentials Accreditation

Over the last few months you have almost certainly seen and heard about major businesses being hit by large-scale cyber attacks.

We take the security of your data very seriously and, although we have not experienced a data breach, we have been investing to tighten our IT security and internal processes.

I am delighted to announce that we have just been awarded the recently created Cyber Essentials accreditation. This award is externally verified and involves checking that our processes meet best practice standards and attempting to hack our systems.

While we are pleased with this outcome, we are aware that the people who perpetrate cyber-attacks are technically capable and persistent. With this in mind, we will continue to take advice on how we can maintain the highest level of security with the data we hold or process.

If you would like further information on this achievement please feel free to contact us.

 

Mike O’Byrne

Operations Manager