FAS

For businesses that find themselves holding significant cash reserves, leaving funds idle in a business bank account, earning little or no interest, is rarely the most efficient strategy. Whether the surplus cash has arisen from profitable trading, the sale of an asset, or simply disciplined cash management, company directors should consider the benefits of keeping surplus funds productive, whilst balancing prospective returns, access to capital and risk.

Most companies will aim to keep a safe operating balance held on immediately available cash. The amount that a company should hold as cash varies depending on a range of factors, including fixed operating costs, anticipated expenditure, Corporation Tax and other liabilities, together with any expected variance in forthcoming trading conditions. We always recommend directors consult with their company’s accountant to help determine the most appropriate level to hold as immediate working capital.

Once immediate needs have been determined, it is important to look to keep additional funds productive, as not doing so presents a missed opportunity to generate additional returns on idle funds but also leaves company cash exposed to the eroding impact of inflation. It is sensible to identify the investment time horizon for any funds not held on immediate cash, to divide funds into a proportion that is easily accessible and separate funds that can be committed to longer-term investments.

Savings options

Business savings accounts provide a straightforward option. Easy access savings accounts tend to offer lower rates of interest, but provide quick access to funds, which may prove invaluable if the business needs to deploy funds at short notice. Beyond immediate access, banks and other financial institutions offer notice and fixed term deposit options, which offer higher rates of interest, but require cash to be locked away for a defined period. In the case of fixed term deposits, the bank will almost certainly not allow earlier access to funds during the fixed term, and therefore caution should be employed to make sure sufficient liquidity is maintained.

Corporate investments

Businesses are not restricted to holding surplus company funds as cash. Investing surplus company funds can generate improved returns to those available on deposit; however, care is needed to select the right mix of asset classes, considering when funds may conceivably be needed, and the level of risk that the directors feel comfortable with.

The first option to consider are money market funds, which are pooled investments that invest in fixed and floating rate notes, high-quality debt instruments and short-dated gilts and corporate bonds. Despite the composition of a money market fund, the fund is not risk free, although returns offered are generally higher than cash deposits.

Companies seeking to employ company cash more effectively could consider investment grade corporate and government bonds, with the aim of generating better returns than those offered by money market funds. When investing in fixed income securities, inflation risk can effectively be reduced by selecting bonds with short dates to redemption.

For company funds that can be invested for a longer period, a diversified portfolio of equities (shares) could provide greater returns, albeit with higher levels of investment risk. By constructing a portfolio across these asset classes, in combination with a sensible strategy for short term cash, businesses can look to build a portfolio designed to keep surplus funds productive, whilst meeting liquidity requirements.

The graph below demonstrates the performance of the CDI Defensive Growth portfolio, a discretionary managed portfolio taking low-medium levels of investment risk, compared to a deposit account that tracks the Bank of England base rate, over the last 3 years. The graph shows the total return achieved, i.e. with income reinvested, but does not take into account investment management or platform charges.

As demonstrated by the graph, by taking a relatively modest level of investment risk, an invested portfolio has historically outperformed returns on cash, although some investment volatility will have been tolerated.

HMRC investment company rules

In our experience, directors are often unaware of HMRC rules when investing surplus funds held by a business, which can have significant consequences if not followed, including the potential loss of Business Asset Disposal Relief, which delivers a reduced Capital Gains Tax rate when directors sell shares in a “trading company”.

HMRC broadly define a “trading company” as one where the majority of the activities undertaken relate to a trade, rather than the investment activity itself. As a rule of thumb, if

20% or more of the company’s income is derived from investments, or 20% of the directors’ time is spent dealing with investments, or 20% of the company’s assets are held in investments, this could jeopardise a company’s trading status in the eyes of HMRC. These are, however, only guidelines, and we regularly liaise closely with company accountants to review the financial position of the company and the implications of any investments held.

Streamlined solutions

When speaking with company directors, we often find investment of surplus funds to be something of an afterthought; however, with sensible planning and expert advice, businesses can aim to keep surplus funds productive.

Thanks to our independent status, we have access to a range of investment platforms that can provide an ideal solution for surplus company cash. Through careful due diligence, we have identified UK based platforms that offer readily accessible savings and fixed term deposits via a range of renowned deposit takers, but also provide the ability for a discretionary managed or advisory investment portfolio to be held on the same platform. This provides a streamlined solution, easing the administrative burden and providing clear visibility.

We are very used to helping businesses invest surplus cash effectively. We can construct bespoke investment portfolios aimed to match the time horizon and risk profile for the funds in question, or manage funds on a discretionary managed basis, thus ensuring the portfolio is regularly reviewed and rebalanced.

If you are a director of a company that holds surplus funds, speak to one of our independent advisers about the options available to deploy those funds more productively.

Minimising tax – or eliminating a potential tax liability altogether – is one of the key drivers behind most sensible financial planning decisions. Whether using efficient vehicles such as Individual Savings Accounts (ISAs) or pensions, or considering investments that provide tax relief, such as Venture Capital Trusts, achieving a tax-efficient outcome can maximise investment returns; however, there are limited situations where paying tax can be beneficial, and one of these is centred on decisions to crystallise gains where Capital Gains Tax (CGT) becomes payable.

Background to CGT changes

Over the past few years, tax legislation on gains made from the sale of an asset has been tightened on multiple fronts simultaneously. CGT is paid on the profit made on disposal of an asset that has increased in value. There are only limited exceptions where CGT does not apply, for example investments held in tax wrappers such as an ISA or pension, or the sale of your primary residence.

Since 2023, the annual CGT exemption (on which CGT is not paid) has been slashed from £12,300 all the way down to £3,000 in the current tax year. This means that many more investors are now dragged into paying CGT, and for those with larger portfolios, CGT is becoming much harder to avoid. Apart from the reduction in CGT exemption, rates of CGT payable have also increased, with basic rate taxpayers now paying 18% on gains above the exemption and higher and additional rate taxpayers now paying 24%. These rates are 8% and 4% higher respectively than the rates that applied before October 2024.

Practical steps to reduce a CGT liability

There are limited steps you can take to reduce or avoid a liability to CGT. Firstly, using tax-efficient wrappers, such as ISAs, Investment Bonds or Pensions, is a sensible step as gains made within these wrappers are exempt from CGT.

Despite the sizeable reduction in the CGT annual exemption, it is important to make use of the exemption where possible. As we approach the end of the tax year, now is a sensible time to review whether you should take action to make use of the exemption.

Married couples can maximise the use of their individual CGT exemptions by transferring assets to each other. Such transfers between spouses are exempt from CGT and provide the opportunity to take full advantage of both allowances.

A further consideration for those in later life is the uplift assets receive when valued for probate purposes. As the base cost that beneficiaries acquire assets from an estate is reset to the value at date of death, unrealised gains are effectively wiped out under current legislation.

Consider the opportunity cost

With the reduction in CGT exemption and higher rates of CGT payable, it can be tempting to fall into the trap of trying to actively avoid taking action, for fear of the CGT consequences. Giving back 18% or 24% of the profit made in tax, whilst unpalatable, however, may be preferable to the potential cost of not taking action.

Consider the position of Mary, a higher-rate taxpayer, who holds a single investment worth £100,000, which has doubled in value from the original £50,000 cost of purchase. The investment has traditionally performed well, but has struggled over recent years, and Mary therefore contemplates selling the investment. If she goes ahead, this crystallises a gain of £50,000, which is £47,000 above Mary’s annual exemption of £3,000. As a higher rate taxpayer, Mary would pay CGT at a rate of 24%, leading to a CGT liability of £11,280.

Mary goes ahead with the sale and reinvests the net sale proceeds of £88,720 (£100,000 sale proceeds less CGT payable) into another investment fund with better prospects for outperformance. After four years, Mary reviews her decision and notes that the new fund has made a compound return of 9% per annum since disposal, whereas the fund Mary held previously has only produced compound returns of 4.5% per annum over the same period. Mary’s investment value now exceeds what her investment would have been worth, taking into account the CGT payable, and she is holding a fund showing improved returns which could potentially mean her decision to switch investments becomes even more valuable in years to come.

Other hidden dangers

The above is a simple example that demonstrates the need to look beyond the potential tax hit and consider the opportunity cost of avoiding a CGT liability. There are, however, other risks that inertia can bring. One risk that could be exacerbated by avoiding a CGT liability is that an investment grows disproportionately in size compared to other assets held, leading to excessive concentration risk. This is particularly true for single investment holdings, where investors are faced with the growing risk that a downturn in the particular market could have an even greater impact. By regularly reviewing an existing portfolio and taking decisions on a discretionary managed or advisory basis, you can keep a cap on unrealised gains and avoid this situation occurring.

An impartial perspective

When faced with investment decisions that could create a CGT liability, inertia could prevent you taking actions that could damage your financial wealth over the longer term. Reframing the tax liability as a tax on gains already made, and focusing on the potential benefits of redeploying funds, can be beneficial. Independent financial advice can prove hugely valuable in this regard, as the input of a skilled and experienced adviser can provide you with an impartial perspective on the best course of action to take. Speak to one of the team to start a conversation.

The key anxiety affecting market confidence is the impact a prolonged regional war could have on global energy supplies. Around 20% of global oil supply passes through the Straits of Hormuz, where tanker traffic has effectively ceased due to drone attacks, and understandably, insurers are not willing to cover traffic movements. The US has mooted the possibility of providing insurance and naval escort, which may help ease the logjam.

Despite this, oil prices are likely to remain elevated for the foreseeable future, and gas prices have also jumped higher after Qatar temporarily halted the production of liquified natural gas; however, to put the price increases in context, Brent and WTI crude prices still remain a considerable way below the highs seen just after the Russian invasion of Ukraine in 2022.

The partial blockage of the Straits of Hormuz is likely to weigh most heavily on countries that rely on energy supplies from the Gulf, such as Japan, South Korea, and India. In addition, freight that now needs to use the route around the Cape of Good Hope will be subject to delays in reaching its intended destination and additional costs.

Furthermore, broader conflict of this scale is likely to weigh on specific industries such as tourism and could potentially have a broader impact on consumer confidence, particularly if an expected hike in energy bills adds further pressure to household budgets.

Thus far, global equity markets have only given back a small percentage of the gains made over the last 12 months; however, the conflict adds to an already complex picture, with markets contending with the fallout from the US Supreme Court decision on tariffs and increasing investor concern over the funding of major capital expenditure by the world’s biggest technology companies.

Given concerns over valuations and perceived market complacency, the FAS Investment Committee took the decision to reduce allocations to US equities in the CDI portfolios in both August and October of last year, and the CDI portfolios continue to carry higher levels of cash than would usually be the case. This allocation insulates against further market uncertainty in the short term. The CDI discretionary managed portfolios are also well diversified, holding exposure to equities across a range of sectors and regions, and carry a good proportion of actively managed funds, where fund managers will be reviewing asset allocation to position their portfolios to take best advantage of the prevailing and expected conditions.

A sustained regional conflict is also likely to exert an increasing impact on monetary policy. Should energy prices remain elevated, this will impair central banks’ ability to cut interest rates to bolster flagging economic growth. The Bank of England may well adopt a “wait and see” approach, before taking action to cut interest rates further. In the US, markets are now expecting no further easing by the Federal Reserve until June or July. As a result of the changing outlook, bond yields have risen over recent trading sessions.

Despite the expected path for interest rates, the FAS Investment Committee have continued to focus on short-dated corporate debt over recent months, due to concerns that inflationary pressures could resurface. This outcome now appears more likely; however, our focus on bonds with less than five years to redemption should provide insulation if bond yields continue to rise in the short to medium term.

The outbreak of conflict in the Gulf is a sharp reminder of the need to hold a diversified investment portfolio, to limit exposure to sectors and regions that are likely to face the greatest impact. History has consistently shown that those who maintain a disciplined, long-term approach are rewarded for doing so, despite periods of volatility. Market sentiment can change rapidly, and attempting to trade conditions such as those we are currently experiencing is not a sensible course of action.

We do not believe the events of recent days merit a material change to the longer-term outlook for global markets, although should the conflict endure for an extended period, this may have an increasingly negative impact on market sentiment in the short-term. The FAS Investment Committee have carefully reviewed the CDI portfolios in the wake of recent events and feel that the portfolios remain well positioned both in terms of asset allocation and portfolio strategy.

Whilst the next review and rebalance for the CDI portfolios is scheduled for May, the FAS Investment Committee will remain vigilant to events, and if they deem action is appropriate, can arrange an ad hoc rebalance at short notice.

We hope these comments help to provide reassurance; however, please do contact us if you have any questions or concerns.

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.