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November 2022

Individual wooden blocks spelling out the word SCAM - Don’t fall victim to a scam

Don’t fall victim to a scam

By | Uncategorised

A recent National Audit Office report laid bare the ugly truth about fraud in the UK, which accounted for 41% of all crimes against individuals recorded in the year to June 2022. The number of frauds and scams recorded have risen sharply over the last year, with the scams becoming ever-more sophisticated. Indeed, Office for National Statistics data shows that people are more likely to fall victim to fraud or cyber offences than any other crime.

Just last week, the Metropolitan Police reported that their detectives were beginning the mammoth task of contacting over 70,000 people they believe have been the victim of a banking scam. Posing as employees of major UK banks, fraudsters have cold called individuals to alert them to a supposed security breach on their account and asked them to access their account whilst on the phone, in doing so disclosing personal information allowing the scammers to clear out their accounts. Police have suggested that one individual has been scammed out of £3m.


Scams come in many forms

These reports are a timely reminder of the need to remain vigilant against fraud and scams, which come in various guises. Whilst frauds involving banking and credit remain the largest proportion of reported crimes, the biggest increase has been seen in consumer retail fraud and advance fee fraud. The latter is where scammers target victims to make upfront payments for goods or services that then do not materialise.


What can you do to protect yourself?

There are some common-sense steps you can take to help defend yourself against financial scammers. Firstly, you shouldn’t automatically trust an unexpected communication from your bank, H M Revenue and Customs or a company you’ve done business with. Always treat any unsolicited calls with suspicion, and do not confirm or provide your personal details or agree to transfer any money.

If you’ve been called by someone claiming to be from your bank, end the call and then phone the official bank number from a different phone. This is important, as scammers can keep the line open if you call back from the same phone.

You should also treat text messages or emails received from a bank or other service provider with suspicion, in particular if the text message asks you to click on an email link provided. The link could direct you to the scammers website, where your personal details can be collected. If in doubt, always log on to a website directly rather than clicking a link in an email.

You should always be wary of cold callers trying to sell you a product or service. Don’t allow yourself to feel rushed into making a financial decision, and always take time to think about whether to take up an offer. This will give you time to seek independent advice if needed.


If it is too good to be true…

Scams involving investments and pensions are also on the increase, and the fraudsters are using more sophisticated ways to make offers look and sound more plausible to unsuspected consumers. A good rule of thumb is that you should always reject any unsolicited contact offering you the opportunity to make an investment. The contact could come via a telephone call, email, post or by word of mouth, and may offer an investment that can provide unrealistic returns that sound too good to be true, or a need to urgently make an investment, as not taking up an offer would lose the potential investor a bonus or discount.


Beware of clones

The use of “cloning” is also becoming more prevalent. This is where the fraudster sets up a fake firm, using the name, address and other details of a legitimate financial firm. The scammer pretends to be calling from a legitimate firm and may try and use convincing language and provide links to the official firm’s website and literature, to make the potential victim feel more comfortable that they are dealing with a genuine firm.


Protect your pension

Scams involving pensions are particularly common. These generally involve cold-calls offering investment opportunities in high-risk investments, such as overseas property, forestry or other unregulated investments. Many of these offers will suggest that the individual needs to transfer their pension to the scammer to access the unregulated investments, and this is often accompanied by high pressure selling tactics employed by the fraudsters. Another potential scam is a call offering the ability for an individual to access or unlock their pension before the age of 55. Again, such a call is highly likely to be fraudulent.


Know who you are dealing with

Consumers can protect themselves from investment fraud by checking who they are dealing with. The Financial Conduct Authority (FCA) Financial Services Register lists details of firms and individuals who are authorised to provide investment and pension services. The FCA also provide a list of “cloned” firms on their website, where you can check whether a fake firm has been previously reported.


Don’t be a victim

Given the worrying upward trend in financial fraud, everyone needs to be vigilant to the risk of falling victim to a scam or fraud. Consumers should always treat unsolicited contact with a degree of caution, and you should always check who you are dealing with if you are contacted out of the blue. Trust your instinct, and if something feels suspicious, then report it to Action Fraud, the UK’s national reporting centre for fraud and cybercrime.

If you are interested in discussing the above further, please speak to one of our experienced advisers here.


The value of investments and the income they produce can fall as well as rise. You may get back less than you invested. Past performance is not a reliable indicator of future performance. Investing in stocks and shares should be regarded as a long term investment and should fit in with your overall attitude to risk and your financial circumstance.

Pound coins resting on pile of autumnal leaves

The impact of the Autumn Statement on investors

By | Investments

Just eight weeks after the Emergency Budget announced by former Chancellor Kwasi Kwarteng, Jeremy Hunt delivered an Autumn Statement which was very different in tone to the previous statement. After analysing the measures announced, the Office for Budget Responsibility have forecast the impact of the changes will lead to a drop in living standards of almost 7% over the next two years.  The Budget statement contained a number of changes to allowances and tax rates that will impact investors from the start of the next tax year. However, with careful planning, the impact of the Autumn Statement on investors can be minimised.


Additional Rate Income Band adjustment

Perhaps the most striking measure in the Autumn Statement was the reduction in the Higher Rate Band for Income Tax. Currently income earned between £50,270 and £150,000 is taxed at 40%; however, from April 2023, the upper end of this threshold will be reduced to £125,140, and income above this level will be taxed at the Additional Rate of 45%.


Thresholds frozen for a further two years

In addition to the changes to the threshold for the top rate of Income Tax, the Chancellor has frozen the Personal Allowance, Basic and Higher rate thresholds for a further two years than had previously been announced. These thresholds will now be frozen until April 2028, and the so-called “fiscal drag” caused by the freeze will generate additional tax for the Exchequer as income increases over time.

As more individuals are subject to the Higher and Additional rates of Income Tax, this increases the opportunity for individuals to reduce their tax burden through financial planning. By making personal pension contributions, an individual can obtain tax relief at their marginal rate, and Venture Capital Trusts, which provide Income Tax relief of 30% on qualifying investments in new shares, can also reduce an individual’s tax liability.

The rules surrounding pension contributions can be complex, and Venture Capital Trusts are higher risk investments and only suitable for investors with an appropriate appetite for investment risk. For this reason, we strongly recommend investors take independent advice on the best way to proceed.  


State Pension increase confirmed

As covered in last week’s Wealth Matters, there had been speculation that the State Pension “triple lock” could have been under threat, given the elevated levels of inflation, and the impact this may have on public finances. The Chancellor announced the “triple lock” remains in place, and that State Pensions will increase by 10.1% from April 2023.

It is important to remember that the State Pension takes up the first part of an pensioner’s Personal Allowance, and the increase from April, whilst welcome, may mean that a greater proportion of personal pension, rental or investment income will be subject to basic rate Income Tax. It would be sensible for pensioners with additional income sources to review the tax efficiency of investments and ensure that allowances, such as the Marriage Allowance, are used where appropriate.


Dividend Allowance cut

The Dividend Allowance, which shelters dividends from shares and business profits from tax, will be reduced from £2,000 to £1,000 from 6th April 2023. When the Dividend Allowance was first introduced in April 2016, it was worth £5,000 and fully covered the dividends generated by shareholdings for many investors. The reduction from April will likely mean more shareholders will be liable to tax on dividends, and an even greater number will be liable to tax from April 2024, when the Dividend Allowance will be halved again to £500.


Capital Gains Tax allowances reduced

Changes to the Capital Gains Tax (CGT) thresholds and rates have been mooted for some time. Whilst the Autumn Statement left the current CGT rates unchanged, the CGT allowance – which is the amount of gain an individual can make on the disposal of assets before CGT becomes payable – will fall from the current £12,300 to £6,000 from April 2023. As with the Dividend Allowance, the Chancellor has gone further and will halve the CGT allowance again, to just £3,000, from April 2024.

This is likely to have a significant impact on investors who are selling assets such as shares and investments, and rental or second properties. As a result, investors may wish to revisit existing portfolios and make sure that the current CGT allowance is used to its’ fullest extent. Furthermore, if an investor makes a net capital loss over a tax year, this loss can be carried forward to offset against gains made in future tax years. This is called an “allowable loss” and can be claimed up to 4 years after the end of the tax year in which the asset was disposed. Given the reduced annual allowances, it will become even more important to report allowable losses to HMRC.


Making use of the ISA allowance

As a result of the reduction of the Dividend Allowance and Capital Gains Tax annual allowance, we feel it is now more important than ever to make use of the annual Individual Savings Allowance (ISA). All income earned within an ISA is exempt from Income Tax, and sheltering Equity investments within an ISA will ensure tax efficiency is maintained, despite the reduction in the Dividend Allowance. Furthermore, all gains made within an ISA are exempt from Capital Gains Tax, and again this renders the ISA even more valuable given the reduction in the Capital Gains Tax allowance over the next two tax years.

The ISA allowance remains unchanged at £20,000 for the 2023/24 Tax Year, and using the available allowance consistently each tax year remains an important way of ensuring investments remain tax efficient.


Planning opportunities

The Autumn Statement introduced a number of measures designed to raise additional tax and as a result, investors could end up paying more tax on dividend income and capital gains from 6th April 2023. However, with careful financial planning, individuals can reduce the impact of the changes to thresholds and allowances on their personal finances. Speak to one of our experienced advisers to discuss how careful financial planning can maximise tax efficiency of your investments in the current and future tax years.

If you are interested in discussing the above further, please speak to one of our experienced advisers here.


The value of investments and the income they produce can fall as well as rise. You may get back less than you invested. Past performance is not a reliable indicator of future performance. Investing in stocks and shares should be regarded as a long term investment and should fit in with your overall attitude to risk and your financial circumstance.

Mature woman reviewing pension options on a laptop at home

Get to know your State Pension entitlement

By | Pensions

With the appointment of Rishi Sunak as Prime Minister, attention has turned to the potential tax increases and cost savings that may be needed to balance the books. The anticipated fiscal statement, which was first scheduled for 31st October, has now been upgraded to a full Autumn Statement, to be delivered on Thursday. One of the possible contentious decisions to be reached by the Chancellor will be the level of increase in the State Pension from April 2023.


History of the Triple Lock

Since 2010, the annual increase to the State Pension has been subject to a “Triple Lock”. This is a guarantee that the annual increase would be calculated by the greater of the Consumer Price Index (CPI), average earnings, or 2.5%. This has ensured that the State Pension has kept up to date with rising prices since 2010, and the additional guarantees provided by the Triple Lock has given further protection in periods when inflation has been low. For example, in 2014-16, when annual CPI fell below the 2.5% level, the minimum lock at 2.5% provided an increase in the State Pension above the prevailing rate of inflation.

The rate of CPI inflation used to calculate the increase to the State Pension is the CPI annual rate as at the September preceding the date of the increase. For the increase due in April 2023, the September 2022 CPI figure of 10.1% will be used.


How State Pension is calculated

The amount of State Pension to which an individual is entitled depends on their National Insurance contribution record. This includes contributions made through work, and contributions added when an individual is unable to work. You need 35 qualifying years of National Insurance contributions to get the full amount, and a minimum of 10 qualifying years are needed to be entitled to any level of State Pension.

Credits earned before 6th April 2016 are treated differently to those earned after this date. At the point at which an individual reaches State Pension age, a “starting amount” is calculated, which is the larger of the pension you would receive under the former State Pension system, or the new State Pension, which currently amounts to £185.15 per week. It is, therefore, possible that the entitlement under the former system provides a greater entitlement than the new State Pension, and this amount is protected, and paid on top of the new full State Pension.


How to check your State Pension entitlement

It is a good idea to obtain a State Pension forecast, which provides an indication of the likely State Pension to which you will be entitled. You can either obtain a forecast from the Government Gateway, or submit form BR19 to the Department for Work and Pensions. The forecast will also provides details of the qualifying years on your National Insurance record, from which you can identify any gaps in the record.

If there are any gaps, an individual can make voluntary National Insurance contributions, which can make up for years where a full contribution was not made. Individuals can make contributions to catch up any gaps in their record during the last six years, and the Government’s Future Pension Centre will be able to provide details of the cost of the voluntary contributions.

It is often the case that making voluntary contributions, where necessary, offers good value for money. However, each individual needs to consider their own position to determine whether it is worth making voluntary contributions.


Increasing retirement age

The age at which individuals are entitled to their State Pension remains under review, after a number of changes over recent years. Under the current legislation, State Pension age is currently 66 and this will gradually rise to 67 for those born on or after April 1960. A second increase is also scheduled, to age 68, between 2044 and 2046 for those born on or after April 1977; however, there have already been consultations, which have looked at bringing this date forward to between 2037 and 2039. A further announcement is due on the proposed changes by May 2023.


Build your own provision

Whilst the State Pension is available to all individuals with sufficient National Insurance contributions, relying on the State Pension alone is likely to lead to a very modest retirement. This is why we strongly recommend individuals look to make their own pension provision, to supplement the State pension payments. Most employees are now eligible to join auto-enrolment pension schemes, although it is important to ensure an adequate level of contribution is made, and your pension is invested in good performing funds.

Another reason to build personal pension provision is the increase in the State Pension age over coming years. Whilst average life expectancy has risen steadily over recent years, working right up to State Pension age may not be desirable or indeed practical. For example, depending on the nature of the job, ill health could force an early retirement, and by using the flexibility offered by personal pensions, it may be possible to look to draw a pension in the years leading up to State Pension age, allowing a reduction in hours or potentially an early retirement. Whether this is feasible depends on many factors, and this is where personalised financial advice can help you plan ahead for the future with confidence.

If you are interested in discussing the above further, please speak to one of our experienced advisers here.


The value of investments and the income they produce can fall as well as rise. You may get back less than you invested. Past performance is not a reliable indicator of future performance. Investing in stocks and shares should be regarded as a long term investment and should fit in with your overall attitude to risk and your financial circumstance.

Pile of Sterling notes and coins - Generating an income through dividends

Generating an income through dividends

By | Investments

After more than a decade of negligible returns, deposit interest rates have slowly increased over the course of the year. The actions of the Bank of England, in an attempt to slow inflation, have given savers some respite after many years of ultra-low interest rates.

For those seeking to generate an income from their capital, to supplement income from other sources such as pension or property rental, cash has given very little in the way of income since 2008, and investors have turned to other forms of investment, such as equities, to generate better returns. With cash deposits now offering higher rates than at any time over the last decade, some may consider whether cash is a viable option for income generation. However, as we will explain, there are good reasons for investors to stick with assets, such as equities, to provide a consistent income.


The inflation trap

After the measures taken by Governments and Central Banks around the World to help their economies through the Covid-19 pandemic, and the significant inflationary pressure exerted by the war in Ukraine, inflation stands at over 10% in the UK and Eurozone, and 8% in the US. This headline rate somewhat understates the true impact of the cost of living on individuals and households, where essential items such as food and energy have seen much greater price increases than the official rate.

Looking at deposit rates currently available on fixed rate savings bonds, a rate of over 4% can now be obtained for locking cash away for one year. This may, at face value, seem attractive, particularly when compared to savings rates seen over the last decade. However, when the effect of headline inflation is taken into account, this represents a negative real rate of return of -6%. In other words, the spending power of a saver’s capital is still eroding, despite the higher savings rates on offer.

Indeed, the current conditions provide a deeper negative real rate of return for cash deposit than at any time since 2012. Between 2012 and 2021, the headline Consumer Prices Index did not exceed 3%, and therefore even a deposit rate of 0.1% would have only produced a negative real return of -2.9% per annum during this period.

Despite the disappointing real return, cash remains an important element of any sensible diversified investment strategy. However, for investors seeking consistent income levels, with the potential for capital growth in an attempt to offset the eroding effects of inflation, equity income investments remain a viable and attractive option.


Growing an income

Investors in equities derive returns from two sources. Firstly, an investor will hope that the value of the investment will rise over time, as growth in the profits of the company is reflected in the price of the share owned by the investor. Secondly, successful companies make distributions of a company’s earnings to its shareholders in the form of a dividend. The level of dividend paid, divided by the share price, provides the dividend yield figure, which is a useful way of comparing the income generated by equities to the income earned on cash, or any other income generating investment, such as a rental property.

It is important to note that dividends are not guaranteed, and are reliant on the fortunes of the company in which the investor owns shares. Large, stable companies tend to offer a consistent dividend, and would only seek to cut their dividend if the company saw a significant downturn in performance. For this reason, equity income strategies tend to focus on mature large cap stocks, with a track record of consistent dividend payment.

Dividend growth is a key added attraction. Many companies look to grow dividends paid out to investors year on year and there are a small number of global giants, such as Johnson and Johnson and Coca-Cola, who have consistently increased their dividend at each declaration point for many years.


Diversification is key

Within any equity income strategy, it is important to maintain a well diversified portfolio. This is where collective equity income funds can provide investors with an allocation to a large number of individual positions, to spread the risk and also achieve a regular income stream. Equity income funds are generally actively managed, although an increasing number of passive options are now available. Most equity income funds adopt the approach of balancing income generation with capital appreciation over time, and whilst investors can achieve additional growth through reinvested dividends, those seeking an income can arrange for this to be paid out.

Further diversification can be achieved by investing in global equity income funds, in conjunction with UK equity income, as this further spreads the investment across different geographies.


Focus on the longer term

2022 has been a difficult period for investors in almost every asset class, which is in stark contrast to 2021, where most asset classes posted strong returns. Over the longer term, the total return – i.e. income and capital appreciation – generated by equity income funds has a significant lead over the return achieved on cash deposit. For example, since 2016, cash returns have only beaten returns from equities once (2018) and in the other years, equities have outperformed by a wide margin.

Despite the increase in cash savings rates, we feel that equity income remains a viable option for investors seeking an income from their investments. Naturally, risk needs to be considered, and an element of cash savings is an important part of any diversified strategy. This is where expert financial planning can add value, both in respect of helping investors determine the appropriate strategy for their objectives and attitude to risk, and also devising an appropriate portfolio of funds to generate an attractive level of income.

If you are interested in discussing the above further, please speak to one of our experienced advisers here.


The value of investments and the income they produce can fall as well as rise. You may get back less than you invested. Past performance is not a reliable indicator of future performance. Investing in stocks and shares should be regarded as a long term investment and should fit in with your overall attitude to risk and your financial circumstance.

Gold bars representing gold investment - Has Gold lost its shine?

Has Gold lost its shine?

By | Investments

In a year dominated by the War in Ukraine, higher inflation and political upheaval, most asset classes have struggled to make headway over the year to date. According to traditional investment theory, these conditions would usually prove positive for the price of Gold.


A store of value?

Gold has been viewed as a highly valued precious metal for centuries, with the first records of Gold being considered a desirable symbol of wealth dating back as early as 4000 B.C.. Gold coins were first struck around 550 B.C. and records show that these coins were used as currency by merchants at that time.

Gold is a scarce resource, and apart from being valued both as an investment and in the form of jewellery, it is used in electronics, with small amounts of Gold being used in the production process of everyday items such as smartphones, televisions and cars.

Investors often perceive Gold as being a store of value, and it has a long-standing reputation for being a safe haven in troubled times. This has been the case during recent periods of global turmoil. Investors in Gold were rewarded in 2020, when the World was in the grip of the Covid-19 pandemic. Given the high degree of uncertainty lockdowns and restrictions caused, it is perhaps not surprising that Gold prices climbed rapidly, surpassing $2,000 an ounce for the first time.

The increased geopolitical risk caused by the Russian invasion of Ukraine also provided a temporary spike in Gold prices. The price of an ounce of Gold was $1,800 at the start of 2022, and following the Russian invasion, Gold climbed above $2,000 an ounce by early March, as investors in Equities and Bonds took flight amidst the turbulence.


An inflation hedge?

As Gold is a finite resource, the supply of Gold cannot be manipulated in the same way as currencies, where Governments and Central Banks can print paper currency to control supply and demand. In theory, this means that the value of Gold cannot be devalued in real terms, and is why many investors continue to believe Gold to be a hedge against inflation.

This should be good news for Gold investors, given the elevated levels of inflation seen around the World. Inflation in many Western economies has reached levels that have not been seen for many years, as a result of the monetary policies adopted during the Covid-19 pandemic, and the hikes in energy and food prices seen following the invasion of Ukraine. The reality for Gold prices over recent months has, however, been somewhat different. Gold has been a disappointing investment, falling by almost 20% in Dollar terms from the peak seen in March. So why has Gold underperformed this year, and should investors still consider Gold as part of a diversified portfolio?


Gold has fallen heavily since March

As we progress towards the end of 2022, inflationary pressures continue to dog wider financial markets, and the situation in the Ukraine is far from stable. The recent falls in Gold prices may, therefore, seem a little surprising. However, there are a number of key factors that have led to the underperformance of the yellow metal.

Gold as an investment can only rise and fall in value, and it doesn’t offer the investor any interest or income. This places Gold at a clear disadvantage to other investments, such as Equities or Bonds. Over recent years, when cash and Government Bonds offered little in the way of interest, the opportunity cost of holding Gold has been minimal; however, with interest rates climbing around the World, investors in Gold need to consider the lost income or dividend stream more carefully, as this forms an important part of total investment returns achieved by other asset classes.

The strength of the Dollar against other currencies has also harmed Gold’s progress. As Gold is priced in Dollars, the dominance of the US currency has led to Gold becoming more expensive for overseas investors to buy. The weak performance of Equities and Bonds during 2022 may also be a contributory factor, as investors look to the perceived value in global investment markets, which stand at a discount to levels seen at the start of the year.

Finally, with Global growth likely to slow over coming months, the likely economic slowdown could reduce demand for Gold in technological manufacturing and jewellery, which may be particularly affected by weakness in consumer confidence. The jewellery industry accounts for over 55% of global Gold demand, and a deep recession could depress prices further.


Is Gold a true diversifier?

Some investment strategies look to include an allocation to Gold within an investment portfolio, as historically Gold prices have a weak correlation with the performance of other asset classes. This has not been the case over recent months, as Gold prices have struggled in line with Equities and Bonds during the summer and autumn. It remains to be seen whether this suggests that Gold has lost it’s attraction as a portfolio diversifier, or the poor performance is just a product of a very difficult year for investors in all asset classes.


Should investors hold Gold?

When we review asset allocation, we regularly consider whether it would be appropriate to hold direct allocations to Gold. However, we usually reach the conclusion that it is difficult to justify holding Gold when investors are not rewarded with income or interest, which is a key component of total investment returns. The short and medium term prospects do not hold much appeal for us to consider an allocation to Gold, although it could have some limited use in the event of further significant geopolitical turmoil.

Holding the right asset allocation is a crucial component of an effective investment strategy. If you hold an existing portfolio of investments, let us review your asset allocation to see whether it meets your needs and objectives, and market conditions.

If you are interested in discussing the above further, please speak to one of our experienced advisers here.


The value of investments and the income they produce can fall as well as rise. You may get back less than you invested. Past performance is not a reliable indicator of future performance. Investing in stocks and shares should be regarded as a long term investment and should fit in with your overall attitude to risk and your financial circumstance.