FAS

With the tax year end approaching on 5^th April 2026, now is the perfect time to review your finances and ensure you’re making the most of available tax breaks and allowances. The remaining time in this tax year offers a valuable window of opportunity as many of the tax breaks available to investors operate on a “use it or lose it” basis.

Maximise pension contributions

For most people, pension contributions represent the single most effective way to reduce their tax bill. When you contribute to a pension, you receive tax relief at your marginal rate. If you’re a basic rate taxpayer, every £80 you contribute becomes £100 in your pension. Higher rate taxpayers can claim an additional £20 back through their tax return, while additional rate taxpayers can claim £25.

Pension contributions can also be a highly effective way for those impacted by “cliff edge” allowances, such as those who earn between £100,000 and £125,140, to make even greater tax savings.

The Annual Allowance for pension contributions is up to £60,000 or 100% of earnings if lower, although those who have flexibly accessed pension savings in the past will be subject to a lower Annual Allowance. Individuals earning over £200,000 may also see their Annual Allowance tapered. As there could be tax penalties if you make contributions that exceed your Annual Allowance, we recommend you seek advice before making additional pension contributions.

Use your ISA Allowance

Individual Savings Accounts (ISAs) remain one of the most tax-efficient ways to save and invest, as you do not pay tax on interest or dividends generated from within the ISA, and assets sold within an ISA are not subject to Capital Gains Tax (CGT). They are also one of the key allowances that need to be used or lost, as allowances cannot be carried forward from one tax year to the next.

For the 2025/26 tax year, the ISA allowance stands at £20,000 per individual. This allowance can be split between a Cash ISA, Stocks and Shares ISA, Innovative Finance ISA, and Lifetime ISA (up to a certain limit). In addition, up to £9,000 can be invested in a Junior ISA, which can be held by a child up to the age of 18. These allowances will, however, change from April 2027, when those aged under 65 will only be able to use £12,000 of the maximum £20,000 allowance within a Cash ISA.

Strategic disposals to use CGT exemption

Those holding investments outside of an ISA or pension would do well to consider whether they should make use of the annual CGT exempt amount before 5^th April. This is the maximum amount of gain that can be realised tax-free each tax year, and this exemption has become much less valuable over recent years, with the annual exemption standing at just £3,000 for individuals, or £1,500 for Trusts. Once the net total gain (once losses have been deducted) exceeds the exemption, CGT is payable on the net total gain at a rate of 18% (for basic rate taxpayers) and 24% (for higher and additional rate taxpayers).

It is also important to remember that married couples can transfer assets between themselves free of CGT, thus enabling both to use their available exemption.

Annual Gift Allowance

With Inheritance Tax planning taking on a higher priority in many financial plans, making use of annual gift exemptions could be a useful way of reducing the value of your potential estate for Inheritance Tax purposes. You can give away £3,000 per tax year (i.e. a couple can give away £6,000) and if you haven’t used the gift exemption in the previous tax year, you can carry forward any unused allowance; however, this can only be done for a single tax year.

Regular recurring gifts can also be made if you have surplus income over normal expenditure. The rules for such gifts are not straightforward; however, they can be a powerful tool for those with surplus income to make additional gifts without being subject to the seven-year clock that applies to capital gifts that exceed the exemption.

Gift Aid donations

An often-overlooked tax planning tool is the ability for higher and additional rate taxpayers to claim tax relief on charitable donations that are made via Gift Aid. In addition, as Gift Aid donations expand your basic rate tax band, making charitable donations could be particularly helpful to those whose income is just above the higher rate threshold (£50,270) or where their annual income sits between £100,000 and £125,140.

Time is of the essence

With time running out in the current tax year, it would be prudent to review your financial position to make sure that you are optimising your tax-efficiency. If action is needed, then we strongly recommend acting sooner rather than later – financial institutions are generally busy as we approach the tax year end, and processing lead times can increase. Furthermore, the Easter weekend falls just before the end of tax year deadline this year, leading to providers setting earlier cut off times for actions to complete within this tax year.

Engaging with a financial planner can help assess your financial position and potentially highlight gaps in your plans that could improve tax-efficiency. Our experienced advisers can carry out an unbiased assessment of your existing arrangements and provide advice on steps you can take to ensure your savings and investments are working hard and tax-efficiently for you. Speak to one of the team to start a conversation.

Over four in every ten criminal offences carried out in the UK each year involve financial fraud. Despite the financial services industry taking steps to crack down on financial fraud over recent years, our growing reliance on technology is opening new doors to would-be scammers, who are turning to ever-more sophisticated methods, which can be hard to spot.

There are, however, common-sense steps you can take to help protect yourself falling victim to an investment or pension scam.

Ways to protect yourself

Financial fraud can take many forms and often start with an unsolicited contact, via a call or text message, or on social media. So-called Phishing scams appear to come from a legitimate source, such as H M Revenue & Customs, Amazon, PayPal or a bank, suggesting you may be entitled to a refund, or have tax to pay. Scammers may also make unwanted calls, purporting to be from a legitimate organisation, to get you to part with your personal details.

You should always treat any unsolicited contact with suspicion. If you’ve been called by someone claiming to be from your bank or another financial institution, end the call and then phone the company back, ideally from another phone. This is important, as scammers can keep the line open if you call back from the same phone. You should never disclose passwords, PIN numbers or bank details over the telephone. Likewise, think carefully before you click on a link contained within a text message or email, as this could direct you to the scammer’s website, rather than the genuine site. If in doubt, visit the legitimate website directly, instead of clicking on a link.

The worrying rise of investment scams

According to the UK Finance Fraud Report, the amount of money lost to investment scams alone increased to £97.7m in the first six months of 2025. These grim statistics are a timely reminder of the need to remain vigilant against investment fraud. Victims of investment scams may not only face financial consequences – becoming a victim of financial fraud can also lead to considerable emotional and psychological harm.

Investment scammers are increasingly turning to social media to carry out their crimes. Advertisements and pop-ups offering high or guaranteed investment returns are becoming increasingly commonplace, as is the use of fake celebrity endorsements, which aim to lend a sense of credibility to the scam.

Many of these scams involve cryptocurrency, but may also feature precious metal investments, or mainstream stocks and shares. Such schemes often guarantee high returns with little risk and sometimes suggest an investment opportunity is only available for a limited period, creating a sense of urgency for the victim to act. It is important not 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 before reaching a decision.

Another tactic used by criminals is to create an investment website that looks very similar to an established brand or service. Such “cloned” websites are cleverly designed to fool the user into thinking they are dealing with a legitimate firm. The Financial Conduct Authority (FCA) maintains a list of “cloned” firms on their website, where you can check whether a fake firm has been previously reported for setting up a fraudulent operation that uses the name, address or other details of a legitimate firm.

Pension scams

Scams involving pensions are also becoming more prevalent. According to Action Fraud, total losses from pension scams in 2024 exceeded £17m, with the average victim losing over £34,000. Pension scams often involve the use of fake websites, or cold calls, and attempt to get the individual to transfer their pension savings with the promise of high returns, often using unregulated investments such as overseas property or a high-risk venture in the UK.

Other pensions scams involve the promise of early access to pension savings. The earliest you can access pension savings in the UK is age 55 (rising to 57 from 2028), and earlier access is only possible under strict conditions such as serious ill-health or a terminal diagnosis with a life expectancy of less than 12 months. So-called “pension liberation” scams falsely claim that you can access your pension savings before the age of 55, and victims not only often lose their pension savings, but become liable to significant tax penalties.

Check if it’s real, before you seal the deal

You can help protect yourself from investment fraud by checking who you are dealing with. The FCA Financial Services Register lists details of firms and individuals who are authorised to provide investment and pension advice. To increase awareness, the FCA recently launched a nationwide campaign under the banner “Check if it’s real, before you seal the deal”, using television, radio and media advertisements.

Trust your instincts

There are simple steps you can take to avoid falling victim to an investment scam. Any unsolicited contact from a financial services provider or other organisation should be treated with a high degree of suspicion. Take time to consider any action carefully and don’t feel rushed into making a decision to part with your funds or financial information. Furthermore, be very wary of online adverts offering the promise of high returns. Trust your instincts, and if something seems suspicious, report it to Action Fraud, the UK’s national reporting centre for fraud and cybercrime.

We firmly believe the value of financial advice has never been greater. Whether trying to navigate global markets in an ever-changing World, or tackling an increasingly complex tax regime, good quality financial advice can deliver clarity and help you build a cohesive financial planning strategy, so you can face the future with confidence.

Selecting the right financial adviser can, however, be daunting, and one of the first decisions that needs to be reached is whether to use an independent or restricted adviser.  Independent financial advisers are not tied to any specific financial products, providers or investment institution, so they can offer impartial advice tailored to their client’s needs. In contrast, restricted advisers can only recommend certain products and solutions from a very limited range of options, and in some cases, will only be able to recommend products from a single provider.

Both independent and restricted advisers must have achieved the requisite level of qualification and be properly authorised. Taking advice from a restricted adviser may, however, lead to missed opportunities due to the lack of freedom to choose investment solutions and funds from across the marketplace.

A changing landscape

The frequent changes in legislation seen over recent years are leading many people to consider a change of course within their financial plans. With unused pensions falling within the scope of Inheritance Tax from April 2027, Trusts and other planning tools such as investments that aim to qualify for business relief, are being used more readily to help families pass down wealth tax-efficiently between generations. More individuals are paying greater levels of Income Tax, reinforcing the importance of tax-efficiency using tax wrappers, and investments that provide tax relief, such as Venture Capital Trusts (VCTs).

To meet the changes in legislation, product providers are creating new solutions. Using an independent adviser will mean that an adviser is free from constraints and can select from these products if they fit a client’s needs and objectives; however, a restricted adviser may be unable to recommend the product if it is not within the panel of options permitted through the restricted advice process.

Another key advantage an independent service has over a restricted adviser is the freedom to select platforms, funds and product providers from across the marketplace, which can also ensure that solutions are cost-effective. As providers launch new services, and existing products are revamped, an independent adviser can actively compare options to aid cost effectiveness.

Investment options

One of the key differences between restricted and independent advisers is the breadth of choice when constructing investment portfolios. Restricted advisers generally build their investment proposition from a prescribed range of funds, which are generally managed by a centralised investment function. Whilst many of the major restricted advice firms use external managers for their investment solutions, the adviser will only be able to choose investments from the pre-selected available panel of funds.

This proves to be an efficient solution for the restricted adviser firm but may not be for the client. Due to the limited range of options offered by restricted advisers, the fund sizes in the most popular restricted mandates have increased to significant proportions. The visualisation collates the largest collective investment funds available to UK investors, which each have more than £20bn under management, and demonstrates the size of the most popular restricted funds, the largest of which now stands at over £43bn.

A major drawback of such large mandates is that the portfolio will largely be passive in nature, with little room for outperformance that can be generated by active management. Furthermore, smaller fund houses, with expert managers and a strong track record of performance, would simply be out of reach of the largest restricted advice propositions.

By way of contrast, an independent adviser can select investment funds from across the range of available funds without restriction. This means the investment solution will be constructed from research and analysis which considers a much broader range of potential options, leading to a more nimble proposition that can readily adapt to changes in market conditions.

Making the most of our independent status

The financial services industry continues to evolve, resulting in the creation of new solutions, and existing products are updated regularly. As an independent firm, we are free to access and recommend such solutions to our clients.

Our Investment Committee undertakes regular reviews of available platform services, and we use independent and external research that enables us to select the right option that is tailored to our client. The Committee also uses expert external analysis to review esoteric products such as VCTs and Enterprise Investment Schemes, which may not be offered by a restricted firm.

Investment returns are directly influenced by portfolio construction and investment selection can make a significant difference to the cumulative returns achieved over the longer term. Our Investment Committee carries out research on all funds available to UK investors on a quarterly basis, leading to an approach that seeks to find the “best of breed” without restriction.

We are proud of the independent holistic advice service that we provide to our clients, and our advice process takes full advantage of our independent status, aiming to tailor the most appropriate financial solution to every client circumstance. Many adviser firms have taken the decision to adopt a restricted approach, which may well have been the right choice for the firm in question, but not necessarily for the client.

Speak to one of our experienced and independent advisers to discuss your financial plans and review your existing arrangements.

Inheritance Tax (IHT) planning has become an increasingly important part of many long-term financial plans. Rising asset values and static nil rate bands mean that many more estates are becoming liable to IHT, and this trend is set to continue; however, with the right planning, IHT liabilities can be reduced or eliminated. One of the most critical — and sometimes overlooked — aspects of effective IHT planning is to ensure that plans remain flexible. A plan that is efficient today may not remain so in the future, and overly rigid arrangements can quickly become outdated and ineffective.

Legislative change

By retaining flexibility, financial plans can remain effective in the face of evolving family circumstances, fluctuating asset values, and most importantly, changes in legislation. The decision to adjust the reforms to Business Relief and Agricultural Relief, which was announced quietly on 23^rd December, is a very recent reminder of the need to remain flexible when planning to reduce or avoid an IHT bill.

In the 2024 Budget, Chancellor Rachel Reeves announced a new combined limit of £1m for assets that qualify for Agricultural Relief and Business Property Relief, scheduled to come into force in April 2026. This represents a notable change to the current position, where there is no limit on which qualifying assets can obtain full relief.

Under the proposals announced in the 2024 Budget, qualifying assets under £1m would continue to benefit from 100% relief from IHT, whilst qualifying assets above this level will only benefit from 50% relief, leaving such assets subject to an effective rate of IHT of 20%.

This was seen as a punitive move for those holding agricultural assets or family businesses and drew widespread criticism. The new £1m allowance would also not be transferable between spouses, which would pose difficulties where assets were held jointly.

In the Budget of November 2025, the proposed rules were tweaked to allow the transfer of allowances between spouses from April 2026. Shortly afterwards, the Government announced a further revision to the rules, increasing the allowance which qualifies for full relief from £1m to £2.5m.

Further upheaval expected

The introduction and revision of the limits to Business and Agricultural Relief are not the only legislative curveball that financial plans will need to negotiate. Unused pension funds will fall within the scope of IHT from April 2027, and individuals holding uncrystallised pensions, or funds in Flexi-Access Drawdown, will need to consider the impact of this change on their IHT position in just over 12 months’ time. Options to mitigate the impact of additional IHT that may become payable include drawing additional funds to either spend or make gifts or arrange non-pension assets in a different structure to reduce the overall impact. As every situation is unique, we strongly recommend that you take independent and tailored advice to ensure that any actions taken do not have unintended consequences.

Changing circumstances

When making financial plans to reduce or avoid an IHT bill on death, it can be easy to forget that our personal and family circumstances often change over time. For example, when gifts are made to the next generation, that “family wealth” could potentially be lost should the recipient of the gift enter divorce. Trusts that name individual beneficiaries may not include the flexibility to include the birth of a new grandchild or great-grandchild. Individuals who make substantial outright gifts may potentially have need of the gifted funds for their own personal use if an unforeseen emergency arises.

Keeping plans flexible allows sensible planning to take place, which can adapt to changes in circumstances.

Fluctuating asset values

It is important to adopt a flexible approach when considering the value of assets that may be liable for IHT. Asset values are rarely static and increases in the value of investments or property could mean that rigid IHT plans are less effective. Likewise, the receipt of an inheritance may push estate values above IHT thresholds and lead to a higher tax liability.

It is not, however, just increases in value that need to be considered. Long-term care, where cumulative costs can run into many hundreds of thousands of pounds, could dramatically reduce the value of an estate, meaning IHT planning undertaken to mitigate a potential issue may not have been necessary.

Retaining control

One of the main barriers to effective IHT planning is the fear of losing control. Understandably, many are reluctant to make large lifetime gifts or enter arrangements that permanently restrict access to capital or income in later life.

Assets that seek to qualify for Business Relief are one potential solution, as these investments allow access to capital should funds be needed for any purpose. Loan Trust arrangements could also be a flexible solution. By loaning rather than gifting funds outright, the loan can be repaid should circumstances change and access to funds is needed. Finally, making regular small gifts to family, rather than large lump sums, can allow the donor to suspend or stop gifting altogether if circumstances change.

A tailored approach

The most effective IHT strategy is often one that employs more than one mitigation tool, and in our experience, a combination of different actions can be both effective and flexible. By use of annual gift exemptions, and making gifts out of surplus income, rising estate values can be kept in check. Combining this with Business Relief investments, Trust planning and possibly protection strategies too, can ensure plans remain flexible to adapt to changing circumstances, whilst offering effective IHT mitigation.

Finding the right combination of strategies, which retains flexibility and provides the necessary tools to mitigate IHT, calls for an individual approach designed to meet your needs, the composition of your assets, and family circumstances. Our experienced advisers can provide bespoke advice on solutions and strategies from across the whole of the market and also review existing arrangements. Speak to one of the team to start a conversation.

For many people in retirement, pensions will form the foundation of their income. For those with sufficient qualifying years, the full State Pension now provides an income equivalent to just under £12,000 per annum, and most retirees can access pension income from workplace and personal pensions accrued during their lifetime, which covers the essential costs of living. Pension income alone may, however, leave little spare for discretionary expenditure or unexpected outgoings.

A well-rounded retirement income strategy does not necessarily need to rely on pension income alone to fund retirement. Savings and investments can be used to generate additional income, which is often more tax-efficient and flexible than income from pension sources.

Diversification is important

Some may be tempted to focus on holding their savings exclusively in cash deposits. Whilst cash forms a part of all sensible financial plans, and carries minimal risk, it is important to bear in mind that the level of interest is likely to be modest, and with interest rates set to fall further this year, those relying on savings interest may well see their income fall. Furthermore, cash is fully exposed to the eroding impact of inflation over time.

Property remains a popular source of retirement income for many individuals. Income from rents can provide a stable income stream and may increase with inflation over the long term. Rental income is not, however, tax efficient, as rental profits are subject to income tax and landlords are increasingly finding the burden of regulation more difficult to manage.

Equities (company shares) can provide an attractive and potentially increasing level of dividend income. Stable companies aim to return excess profits to shareholders in the form of dividends, with many global companies producing an increasing level of dividend year on year. It is, however, important to remember that dividend income is not guaranteed, and the capital value of holdings in equities will fluctuate, depending on underlying market conditions.

Corporate and Government Bonds are another way of generating income in retirement. Most fixed interest securities offer a predictable and attractive income stream, and whilst fixed income investments tend to be less volatile than equities, capital values will fluctuate depending on economic factors and bond interest may be at risk, if the financial strength of the bond issuer weakens.

By blending allocations to these asset classes, a diversified investment portfolio can be created, providing an attractive level of income that can supplement pension income, and provide some prospects for capital appreciation, too.

Improved tax-efficiency

Pension income, be it from a workplace pension, Flexi-Access Drawdown or an annuity, is subject to income tax. In contrast, an investment portfolio can be structured to make best use of available tax allowances to create a tax-efficient natural income stream.

Individual Savings Accounts (ISAs) are often the cornerstone of income planning outside of pensions. ISA income is tax-free, and ISAs also provide an additional benefit in that any gains generated on the sale of investments within an ISA are also free from Capital Gains Tax.

Once ISA allowances have been fully used, General Investment Accounts can provide additional investment capacity. While income from these accounts is taxable, most individuals receive a Personal Savings Allowance, which covers up to the first £1,000 of savings income each tax year, and a Dividend Allowance, where the first £500 of dividend income each year is also free from tax. By carefully structuring their assets, a couple could fully use their ISA allowances each tax year and make use of the other available tax allowances to cover savings and dividend income.

Added value through advice

Creating income outside of pensions is not about replacing pension income but strengthening it. By building and managing non-pension assets, those in retirement can reduce reliance on any single source of income and improve long-term financial security. As with all retirement planning, it is vital to ensure that the strategy is tailored to your needs, meets your attitude to risk and is adequately diversified. Our experienced advisers can add significant value by providing independent holistic financial planning advice, and our ongoing review service can help ensure these strategies remain aligned with changing circumstances and objectives.

Introducing CDI High Income

When seeking a high level of natural income, one option is to build a bespoke portfolio, designed to provide an attractive and reliable income stream. Our advisers regularly construct such portfolios for specific client requirements; however, growing demand for a strategy designed to generate a higher level of income has been the catalyst for the CDI High Income portfolio, the newest discretionary portfolio strategy managed by the FAS Investment Committee.

The CDI High Income portfolio has been designed to generate a higher level of natural investment income while still offering the potential for long-term growth. Being defined as medium risk, around 40% of the CDI High Income portfolio will be invested in UK and global companies that can deliver attractive dividends. The remainder is held in a mix of fixed interest securities combining both high-quality and higher-yielding issuers to balance income and risk. As with all CDI portfolios, the FAS Investment Committee review and rebalance the portfolio at least four times a year, considering fund performance, global macro factors, and market outlook.

As of 31^st December 2025, the yield on the CDI High Income portfolio stood at an attractive 5.03% per annum, which could make the strategy an ideal option for anyone seeking to generate additional income from savings, as part of a wider strategy. The high natural income also lends itself well to those who wish to generate income for the purpose of making gifts out of surplus income, or for trusts, where a life tenant is seeking a higher level of income.

Speak to one of the team to discuss the CDI High Income discretionary managed portfolio.

Most workplace pension accounts are invested in so-called “default” investment strategies. The Pension Provider Survey 2024/5, conducted by the Department for Work and Pensions, reported that around 86% of auto-enrolment pension scheme members are invested in the provider’s default investment approach.

Unless a decision is taken when joining a workplace pension scheme, individuals are automatically placed into a default investment strategy. This is a good idea, as many choose to take no interest in how their pension is invested, and accepting a default strategy ensures that the pension adopts a diversified approach, investing in a range of assets designed for growth over the longer term. This also avoids individuals choosing a very conservative investment approach in their early years, which could potentially lead to a poor outcome.

For those in the early stages of pension saving, with decades before retirement, a default strategy may well be broadly appropriate, as it will provide a high degree of exposure to global equity markets; however, as pension values grow and retirement planning becomes a more important consideration, relying on a default strategy can create unintended risks, missed opportunities and increase the likelihood of underperformance.

Limitations of lifestyling

Most workplace pensions follow a lifestyling or target-date approach. In simple terms, this means investing more heavily in equities during the early years, then gradually switching into bonds and cash as retirement approaches.

The premise of such a strategy is to avoid a “cliff edge” scenario, which could occur if markets fall heavily around the time an individual reaches their normal retirement date. Whilst this is, indeed, sensible, such strategies are often too rigid and fail to consider the need to remain flexible when approaching retirement. Historically, lifestyle strategies were designed around the purchase of an annuity at retirement. Today, many retirees plan to use income drawdown, keeping their pension invested beyond their normal retirement date. For these individuals, reducing growth assets too early can significantly lower long-term income potential. Worse still, automatic de-risking can coincide with market downturns, effectively locking in losses at precisely the wrong moment.

Another common concern raised is the target date set for the lifestyle strategy often coincides with the point at which an individual will begin to receive their State Pension. The default strategy is, therefore, misaligned if the individual chooses to draw their pension at an earlier date.

One size fits all

Default investment strategies are designed to appeal to the average pension saver; however, a single default strategy cannot cater to the diverse needs of pension scheme members, their individual preferences or wider financial circumstances. Some may hold other significant investments, property or business assets, which will provide an income in retirement. Others may have membership of defined benefit pensions, which provide guaranteed income. Holding assets external to the pension may allow a different risk profile to be adopted for the workplace pension.

Ethical preferences cannot easily be accommodated through a default investment approach. NEST, which has over 13 million members, allocates a proportion of their default strategies to climate aware funds. This may not, however, satisfy those who prefer to take a more socially responsible approach to investment. Conversely, given the underperformance of socially responsible investments – when compared to mainstream investment strategies over the last year – investors less concerned with ethical considerations may prefer greater allocations to sectors such as defence, oil and mining, which have outperformed.

Underwhelming performance

We undertake detailed analysis of many hundreds of pension arrangements each year that are held by clients when they approach us for advice. An increasing consensus is emerging, which shows performance from default funds generally falling behind sector averages over the longer term. In the drive to keep costs low, many default investment strategies are now exclusively invested in passive funds, which aim to track a particular index or benchmark. By their very nature, passive funds will only ever track the performance of an index, not beat it. Whilst they are a good way of gaining broad market exposure, focusing on passive investments alone misses out on the potential for outperformance that actively managed strategies can provide.

Further underperformance often becomes apparent as individuals begin to move towards their intended retirement date, where the lifestyle strategy begins to reduce equity exposure and introduce greater allocations to fixed interest securities. Due to the reliance on passive strategies, the fixed income element is often concentrated in longer dated government bonds, which have performed poorly when compared to corporate debt over recent years. Furthermore, the absence of a strategic approach can increase risk, as credit quality and duration are not necessarily adjusted to suit prevailing market conditions.

The importance of advice and review

Pension investments are held for the longer-term, and those entering the workplace today may well be saving for almost 50 years before accessing their pension savings to provide an income in retirement. Over this time, additional performance that could be achieved from a tailored investment approach could lead to a significant difference in pension fund value when reaching retirement.

It is important to seek advice before considering any changes to your pension investment strategy. Our experienced advisers can analyse your existing arrangements and your wider financial objectives, to provide you with tailored, independent advice on an appropriate strategy that meets your goals in retirement. Keeping any strategy under regular review is as important as the initial advice, and our comprehensive ongoing review service aims to ensure that the strategy remains appropriate in light of current and expected market conditions and changes to your circumstances. Speak to one of the team to arrange a review of your existing pensions.

2025 proved to be another broadly positive year for both equity and bond markets. Global indices closed out the year close to record highs, and investors in fixed income and alternative assets also enjoyed strong returns throughout last year. Despite ending the year in good spirits, prevailing market conditions present a challenging conundrum for investors. We look at six key themes that are set to shape market direction during 2026.

1. Falling Interest Rates

Base interest rates in the US and UK fell during 2025, with the Federal Reserve lowering rates by 0.75% and the Bank of England Monetary Policy Committee (MPC) going further, reducing base rates by a whole percentage point.

We expect this trend to continue, as slower economic growth and falling inflation support continued central bank easing. The change of leadership at the Federal Reserve in May could herald a more dovish position, with the new Fed Chair expected to be sympathetic to President Trump’s calls for lower interest rates as the US heads into the mid term elections. We expect the Bank of England MPC to take a more cautious approach, reducing rates by up to a further 0.75% by the end of the year. Central banks will, however, need to remain alert for signs that inflation begins to increase once again, which remains a possibility due to the impact of global tariffs.

2. Increasing Debt

Debt – be it corporate, consumer or government – may well be a key driver of investor sentiment during 2026. Government debt levels continue to spiral, with yields on both UK and US Government bonds remaining elevated. Tech giants, such as Meta, Alphabet and Oracle, have massively increased corporate debt levels to fund Artificial Intelligence (AI) infrastructure. Whilst the increased leverage is necessary for expansion, the pace at which debt levels are rising is concerning, and signs of stress could spread quickly across the sector. Personal debt levels are a further concern, with households borrowing more to cover the elevated costs of housing, food and essentials. Consumer delinquency is rising quickly in the US, with missed payments on car loans hitting the highest level for 15 years at the end of 2025.

3. Consumer confidence (or lack thereof)

Consumer confidence remained subdued throughout 2025, and this trend is set to continue amidst general pessimism about the state of the UK economy. The UK unemployment rate jumped to 5.1% in the three months to October, which together with the higher overall tax take, are leading households to rein in discretionary spending and be more cautious. Recent surveys have indicated that consumers may be even more cautious in 2026 than they were last year, particularly when considering big ticket items. We expect the gloom to continue to weigh on house prices, which may remain broadly static during 2026, despite the positive influence of falling interest rates.

4. Testing tech valuations

The second half of 2025 was dominated by the growth in AI and the prospects of future returns from heavy capital expenditure on AI infrastructure. The performance of a handful of global giants, such as Nvidia, Microsoft, Apple and Alphabet, made a significant contribution to returns last year, although valuations are now demanding. Revenue growth from the biggest US tech names will need to continue to outperform to match lofty market expectations, with the risk that disappointment could see significant downside from current levels. Given the representative index weight of the largest US tech stocks, even modest falls from current levels would weigh on index performance.

5. Focus on quality names.

One trend that may become apparent as we head through 2026 is a further broadening of returns from global equities, where the focus may well shift from global tech giants to high quality, large cap stocks with consistent earnings and lower valuations, offering better value. Lower inflation and anticipated rate cuts may help support the outlook for quality stocks, which may also be less impacted by lower economic growth. Given the expectation of lower returns from global equities during 2026, stocks offering an attractive dividend yield may also be in demand, with total returns from capital and dividend income becoming increasingly valuable.

6. Continued tariff threat

2025 saw global trade turned on its head by the tariffs introduced by President Trump. As we enter 2026, expect to see further uncertainty as the US Supreme Court rules on the legitimacy of the sweeping tariff announcements. Trump will certainly counter a decision that rules the broad tariffs announced under the International Economic Emergency Powers Act are unlawful, by making use of more targeted tariffs on individual sectors of the economy, which may be time limited.

As the year progresses, we will have a clearer picture of the impact of tariffs on global growth and how companies have dealt with increased costs. Whilst the immediate risk posed by trade tensions may have eased, major question marks remain over negotiations with key trading partners such as China, where tensions could reignite.

Time to review portfolio allocations

After two years of strong returns from both equities and fixed income, 2026 may prove more challenging for investors. As always, nimble investors can continue to seek out good opportunities by careful asset allocation and portfolio positioning. As we enter a new year, this may be a good time to reassess your investment goals for 2026, consider the impact of expected trends on your portfolio, and review existing cash positions in a year when interest rates are likely to fall further.

Our experienced advisers can provide an independent review of your existing arrangements, to consider how you are positioned for the year ahead. Speak to one of the team to start a conversation.

After enjoying a positive year in 2024, investors would have been wise to expect more volatile conditions in 2025. Despite periods of significant uncertainty, major asset classes have produced strong returns over the year to date, with global stock market indices standing close to all-time highs at the time of writing. Fixed interest investments have enjoyed a strong year too, buoyed by expectations of continued monetary easing. In the final Wealth Matters of 2025, we consider the factors that have contributed to the strong performance.

Rallying markets

2025 got off to a slow start. January saw market jitters over the release of an Artificial Intelligence (AI) model by Chinese firm DeepSeek, which led to sharp falls in the value of leading US tech names. The announcement of sweeping tariffs by the US administration in April led to a sharp global sell-off, as investors grappled to understand the implications for the global economic outlook. Market volatility rose to the highest level since the peak of the Covid-19 pandemic but quickly subsided following more conciliatory noises from Washington.

The second half of the year has seen a rally in virtually all asset classes, with global equity indices buoyed by strong earnings reports from US tech giants, and investor hope that the AI boom will see companies continue to beat profit expectations. Investment in AI has been a major contributor to US economic growth over the last 12 months, although the weakness elsewhere increases the risk that a small deceleration in the outlook for AI profitability could lead to weaker economic growth in the medium term.

Investors also remain confident that the Federal Reserve will continue to cut interest rates, as the US labour market cools. Federal Reserve chair Jerome Powell, who has successfully steered the US economy through choppy waters, steps down from his role in May 2026, with his replacement likely to be sympathetic to President Trump’s desire to see significantly lower interest rates. Such a move is risky and may cause inflationary pressure to build once again.

Away from the US, Japan’s Nikkei 225 index broke through the 50,000 barrier for the first time, and Chinese markets also outperformed. European stocks also ended the year higher, with strong global demand feeding into the performance of the FTSE100.

Greater polarisation

2025 has been a year where global markets have become even more polarised, given the rapid increase in market capitalisation of global tech giants. The combined market capitalisation of Nvidia, Apple and Microsoft now stands at over $12 trillion, over four times larger than the combined value of all one hundred constituents of the FTSE100. The size and market weight held by a handful of companies simply increases the risk of a pronounced reversal in global indices should one or more of the biggest US stocks fail to meet sky high earnings expectations.

The last 12 months has seen a clear division between those sectors that have outperformed and those that have lagged. Apart from Technology, Industrials – particularly those involved in the manufacture of defence equipment – have seen surging order books on the back of increased defence spending commitments and infrastructure projects. Banks have also been well-supported, and increases in commodity prices have boosted the Mining sector.

Consumer-related stocks have been overlooked over the course of 2025. The US is experiencing “K” shaped economic growth, with the gap between the financial prospects for higher earners, and those on middle and lower incomes, widening. This disparity has not been helped by the longest-ever US government shutdown that started in October and lasted 43 days. Property related stocks have also struggled to gain traction, and pharmaceuticals have continued their underperformance, as regulatory headwinds remain. As always, sector underperformance can present opportunities where stocks carry lower ratings.

Geopolitical influence

Although it may have been a quieter year for politics than 2024, when major elections were held in the US, UK and elsewhere, markets have continued to grapple with political influence in the form of decisions taken by the US administration. The imposition of tariffs was the primary cause of market uncertainty earlier in the year, and we expect tariffs to return to the headlines in coming months, as the US has yet to finalise deals with its’ major trading partners. Furthermore, the US Supreme Court will shortly rule on the legality of the broad tariff programme, which could derail plans by the White House.

Tensions in the Middle East may have subsided at present; however, significant distance remains between Ukraine and Russia in their attempts to reach a peace deal. Markets remain susceptible to any heightening of tensions in the region, which could damage investor confidence.

Not just equities

Equity markets have not been alone in enjoying a positive 2025; investors in fixed income have seen a year where returns have been consistent, amidst a backdrop of global monetary easing. Government debt to Gross Domestic Product (GDP) ratios continue to expand; however, corporate balance sheets look comparatively healthy, with default rates amongst investment grade debt standing at historically low levels. For those holding diversified portfolios, the smooth performance curve of fixed income over the course of the year has served to reduce equity volatility, which was more apparent in the first half of 2025.

Seasons Greetings

As 2025 draws to a close, we look forward to a year that may present investors with greater challenges but remains full of opportunity. Our first Wealth Matters of 2026 will set out our thoughts on the key themes for the coming year. We take this opportunity of wishing our readers a Happy Christmas and a healthy and prosperous 2026.

The Budget delivered on 26^th November contained no significant changes to Inheritance Tax (IHT). Following the reforms announced in the 2024 Budget to Business and Agricultural relief, together with the upcoming changes to the way unused pensions are treated, the lack of fresh announcements was not unexpected; however, the continued freeze on Inheritance Tax bands until 2031 announced as part of this year’s Budget is a stealth tax increase, that will drag more estates into the scope of IHT and increase the burden on estates already impacted.

The nil rate band for Inheritance Tax – i.e. the amount an individual can give away before IHT applies – has remained static at £325,000 since 2009, and the recent measures announced effectively mean this band will not have increased for 22 years. Granted, the Main Residence Band, which covers the family home when left to direct lineal descendants, and the transfer of bands between spouses, give additional headroom before death duty becomes payable. Despite this, increases in the value of investments and residential property over the last two decades mean that even modest estates are now at risk of an IHT charge.

Given these factors, it is no surprise to us that Inheritance Tax planning is becoming a key financial consideration for families. Protecting family wealth and ensuring this can be passed on to the next generation without onerous tax liabilities, is a common topic of conversation with clients, and one that will become a more pressing issue for many once the changes to the treatment of unused pensions come into force in 2027.

Introducing Discretionary Trusts

In a recent edition of Wealth Matters, we started to consider how Trust planning can be used to mitigate a potential IHT liability and focused on Loan Trusts as being a way to protect future growth on the value of assets from IHT, whilst the settlor (the person making the loan) retained the ability to receive repayment of the loan, if they required funds. This only provides partial protection from IHT, as the outstanding loan remains in the individual’s taxable estate.

A more effective, but less flexible, form of IHT mitigation is to make a gift into a Discretionary Trust. To be effective for IHT purposes, the settlor needs to be excluded as a beneficiary. Without this exclusion, the settlor would retain a “reservation of benefit,” rendering the gift ineffective for IHT planning. An often-cited example of this is an individual gifting the family home into Trust but remaining resident in the property without paying a market rent. This would be considered such a reservation of benefit.

Gifts into Trust reduce an individual’s nil rate band by the amount of the gift, although gifts into Trust over £325,000 are liable to an upfront charge to IHT of 20% on the excess above the nil rate band. Assuming the donor lives for seven years, the gift is then considered outside of the donor’s estate.

The Discretionary Trust Deed will set out who can benefit from the Trust; however, the Trustees will have discretion over who receives benefits from the Trust and in what proportions. No single beneficiary has any direct entitlement to the Trust assets, and instead, the Trust Deed names a pool of potential beneficiaries. In most cases, this will be the direct family of the settlor (children, grandchildren, and great grandchildren) and can include direct lineal descendants not yet born. The settlor will usually appoint themselves as one of the Trustees, along with their spouse, and adult children.

This creates a “family trust” that can benefit any family members in the future. When we discuss establishing such lifetime Trusts with clients, the settlor often considers situations such as helping grandchildren through university, advancing funds at key birthdays, or providing funds for future generations to help them place a deposit on their first home, as being an appropriate time to consider advancing funds from a Discretionary Trust.

Keeping funds within a Trust arrangement can also help protect family wealth in the event of matrimonial breakdown within the family, or where funds that would otherwise be gifted directly to family members, may be spent unwisely.

Tax and Trust investments

When investing Trust assets, the Trustees need to adhere to the requirements of the Trustee Act, and ensure that Trust funds are prudently invested, provide adequate diversification and are reviewed to consider whether they remain appropriate.

Discretionary Trusts are subject to a punitive tax regime, which makes the choice of investment vehicle even more important. Trustees pay tax at a rate of 39.35% on dividend income and 45% on interest, and they also only receive 50% of the Capital Gains Tax allowance enjoyed by an individual. As a result, an Onshore Investment Bond is often selected as an investment vehicle, as it is taxed internally at a lower rate, and segments of the Bond can be assigned to beneficiaries when the Trustees agree to advance funds. The act of assignment does not trigger a tax charge, leaving the beneficiary to surrender the segments advanced at their own marginal rate of tax, which is often lower than the rate applicable to Trusts.

How we can help

Establishing a Discretionary Trust during an individual’s lifetime can be an effective tool to reduce a potential Inheritance Tax liability and protect family wealth. Decisions around the creation of the Trust, the selection of an appropriate investment strategy and ongoing management of the Trust assets are areas where our experienced team can provide advice.

It is, however, important to recognise that Trust planning is just one tool available to mitigate a potential Inheritance Tax liability. Other options, such as Business Relief investments, regular gifting strategies or protection policies, may be more appropriate, depending on your circumstances. Our independent advisers can take a holistic view of your potential estate and consider solutions from the whole of the market and provide advice on the option or options that best suit your needs. Speak to one of our team to start a conversation.

We have previously commented on the growing popularity of passive investment across the industry, and the dangers of relying on a passive only approach when constructing an investment portfolio. This year has, to date, seen major global indices advance, leading to reasonable outcomes for those investing in tracker funds. With global equity indices becoming more concentrated, and the S&P500 and Nasdaq looking fully valued, 2026 could well be the year when active fund management can provide superior performance.

Over the last decade, passive investment funds have grown in popularity, receiving significantly higher inflows than active funds over the last five years. Some in the industry, and many financial “influencers” (whose “advice” we recommend you treat with caution) focus on an evidence-based investment approach, which argues that it is difficult for active managers to beat the market over time, and any strategy should, therefore, be exclusively held in passive investments.

The rise in the popularity of passive strategies is also evident from our own market analysis. Our Investment Committee regularly undertakes a comprehensive review of managed portfolio solutions offered by discretionary fund managers, and our analysis clearly demonstrates that many of our competitor’s products and services carry an increasing bias towards passive investments.

Why passive investments are not the panacea

It is unarguable that passive funds provide a low-cost way of accessing global markets, and they have a place in most diversified strategies; however, we contend that passive funds should be used as part of a broader strategy which includes actively managed funds. Supporters of passive investments fail to take account that a passive investment fund will only track – and never beat – the representative index or market it is trying to replicate. Furthermore, due to tracking errors, most passives lag their target index by a small margin.

Adopting a pure passive approach also means that when the index falls, so does the value of the tracker fund. Unlike a fund with an active manager, who could potentially take avoiding action by reducing allocations, increasing the percentage of cash, or using derivatives, the passive fund will simply follow the representative index.

Over recent years, active fund managers have found it difficult to consistently outperform major global indices, in particular US large cap indices such as the S&P500. Those who champion a passive only approach use such evidence as rationale for their exclusive use of tracker funds. Whilst this has historically been the case, we have noted more actively managed funds investing in the world’s largest market are now producing outperformance over the medium term. This trend may well continue if indices fail to make significant headway during 2026.

A well-documented area in which passive investment has limitations are Fixed Income funds which invest in Government and Corporate Bonds. While passive strategies are often primarily associated with Equities, the universe of passive bond funds has expanded significantly over recent years, encompassing UK and Global benchmarks and providing exposure to portfolios comprising hundreds to thousands of individual bond positions.

Whilst these funds provide broad market exposure, our experience shows that active Strategic Bond managers, who can adjust duration exposure, and portfolio credit quality, can respond to macroeconomic conditions, monetary policy shifts, and evolving credit fundamentals, to adjust their portfolios to take best advantage of the prevailing and expected conditions.

Why 2026 may be tougher for passives

Whilst global market indices have advanced over 2025 to date, the headline index performance masks a significant variance in performance across different sectors. For example, at the time of writing, the largest seven components of the S&P500 index – Nvidia, Apple, Microsoft, Amazon, Alphabet, Broadcom, and Meta – account for 35% of the index by weight. Whilst robust performance from Tech stocks over the second half of 2025 has helped propel index performance, the valuations of leading names have become stretched in places, and any weakness in the sector will have a disproportionate impact on the performance of the index. Amongst the remainder of the S&P500, there are undoubtedly pockets of value, which can be exploited by an active manager, who can allocate a greater proportion of the portfolio to undervalued positions. By doing so, they may also be able to limit the risk to the downside if market sentiment turns.

Our approach

We always aim to seek out good value for our clients, and our independent status allows us to take an unbiased approach as to the precise blend of funds we select. The FAS Investment Committee undertake considerable research on a sector and region basis when we conduct the regular review of funds that we recommend to clients, which encompasses both active and passive options. As a result, this allows us to select passive funds, where this is appropriate, but blend in active funds where we see outperformance.

Our preference when selecting active funds is to choose managers who adopt a conviction-based approach and have a clear vision as to how their fund is to be positioned. This can often mean investing in a concentrated portfolio, when compared to the representative region or universe of stocks available. We regularly come across actively managed funds that align their portfolio closely to the benchmark index. In most instances, such funds fail to impress, as they levy higher charges for active management, without providing the prospects for outperformance.

Summary

We believe passive investment funds have a place in any sensible portfolio, as they provide a low-cost way of accessing broad market exposure; however, we do not subscribe to the mantra of many in the industry who believe it is the right approach in all circumstances. We continue to recommend clients also gain exposure to good performing actively managed funds which can provide significant outperformance and drive overall portfolio returns.

Whilst passive funds provide a low-cost option, we have secured discounts on a range of good-performing actively managed funds over recent years, where charges are only slightly higher than the passive alternative. We will, of course, continue to negotiate lower fund charges with leading fund houses where possible.

If your investment manager is using a passive only approach, we feel it may be a good time to consider whether this remains appropriate. Speak to one of our experienced advisers to discuss your portfolio asset allocation.