FAS

Incredible though it may seem, we are already halfway through 2026. In this edition of Wealth Matters, we will review a largely positive – albeit volatile – first half of the year and look at the key factors that are likely to shape market direction over coming months.

First Half Performance

Global equities have once again faced geopolitical headwinds during the first six months of this year. Despite the potential for the global economic outlook to be derailed by events in the Middle East, major World indices have continued to make forward progress. The S&P500 index of leading US shares rose by 9.55% over the first six months, and European bourses made modest progress. Asia-Pacific markets generally outperformed, with the Nikkei 225 index up almost 40% over the year to date.

Performance to 30^th June 2026 – source F E Analytics

Two key themes have shaped market direction so far this year. The outbreak of hostilities between the US/Israel and Iran dented the positive sentiment and sent energy prices rapidly higher. Brent Crude prices surged to $117 USD a barrel, levels not seen since the Russian invasion of Ukraine in 2022, and together with the closure of the Strait of Hormuz, limited oil supply and threatened to push inflation across Western economies significantly higher. The cessation of direct military action has moved oil prices to a more comfortable level, although shipping traffic through the region remains interrupted. Most commentators expected a series of base interest rate cuts over the course of this year. This narrative was quickly derailed by the conflict, and inflation is expected to remain elevated throughout the remainder of 2026.

The other key driver has been significant capital expenditure in the technology sector, as companies race to build the necessary infrastructure to support the increasing use of Artificial Intelligence (AI). The demand for processing power has led to a surge in borrowing by major tech giants, with the spending helping to propel semiconductor stock prices sharply higher. Investors have, at least to date, accepted the higher debt levels as a necessary step to support future growth.

Reasons to be cheerful

Markets are driven by confidence, and the resilience shown in the face of another geopolitical shock earlier this year helps support a broadly positive outlook. The rapid expansion of AI shows no signs of slowing in the short-term, although valuations are becoming stretched in places. The market debut of SpaceX – the largest initial public offering in history – was generally well supported and with Anthropic and Open AI set to float over coming months, we expect investor interest in the tech sector to continue.

The AI trade will continue to drive other sectors of the economy over the coming months. The power demands of AI infrastructure are significant and provide growth opportunities in traditional and alternative power generation. Looking further ahead, expect investor focus to shift to the wider benefits of AI across many sectors of the economy, as workflow processes are streamlined, and robotics and automation are more widely implemented.

Despite the impact of higher inflation, the Trump-led appointment of Kevin Warsh as the Federal Reserve chairman may help sustain the market optimism. Whilst rate cuts may be off the cards for the time being, markets anticipate Warsh will look to begin cutting rates as soon as it is prudent to do so, possibly in early 2027.

…and reasons to be fearful

Given the positive performance seen over the last 2 ½ years, it would be unreasonable to suggest any leading global equity market offers good value at current levels. Valuations in some sectors are demanding, and investors now fully expect major tech names to not only match but beat earnings expectations consistently. Disappointment could lead to a sharp de-rating and due to the sheer size of the largest companies by weight, push indices lower.

The fragile ceasefire in the Middle East appears to be holding – just. Tensions remain high, and any resumption of major military action is likely to dampen investor confidence. Even if activities in the region move to more normal levels, oil infrastructure may take many years to replace, and reserves will need to be replenished. Oil prices may, therefore, remain anchored around current levels for some time to come.

US domestic political risk is likely to increase as we enter the final months of 2026. The US mid-term elections may be challenging for the current administration, given the cost-of-living pressures many Americans face. The February ruling that invalidated the sweeping tariffs introduced by President Trump in April 2025 has led to a pivot towards more targeted measures; however, recent threats by Trump to impose tariffs on countries that levy a digital services tax show that tariff risk has not disappeared and could weigh disproportionately on multinational technology firms with significant European revenue.

The importance of diversification

After a strong start to 2026, the second half of the year may well see the positivity around AI dampened by wider concerns around the strength of the global economy. At an index level, markets would do well to advance significantly higher from current levels in the short term, and the disproportionate index weight held by the largest stocks is a specific risk that those who choose to simply “buy the market” would be wise not to ignore.

As always, the prevailing conditions produce opportunities where value exists. Defensive sectors of the economy, where stocks offer positive cash flow and a strong dividend yield, look appealing. Asia Pacific markets continue to tell a strong growth story, underlining the importance of global diversification.

A nimble portfolio strategy that seeks out areas of value appears well placed in the current conditions. At FAS, our investment approach focuses on active fund managers that can add value, combined with selected broader market exposure. We would suggest the halfway point through 2026 is an ideal time to review how your portfolio is positioned for the months ahead. Our expert advisers can undertake an independent review of an existing portfolio and make suggestions to adjust strategy where appropriate. Speak to one of the team to start a conversation.

Source: F E Analytics July 2026

After a brief hiatus, inflationary pressures are building once again. A combination of surging energy prices, persistent wage growth, and escalating geopolitical tension has seen inflation spike, and whilst levels of inflation are nowhere near the extreme levels seen in 2022 after the Russian invasion of Ukraine, it is sensible advice to pay careful attention to the impact of persistently higher inflation on investment performance.

Driven by global tension

The Bank of England’s April 2026 Monetary Policy Report showed that annualised inflation rose to 3.3% and is expected to climb higher as the effects of elevated energy prices work their way through supply chains. This reality is in stark contrast to the predictions for low inflation and easier monetary policy that most economists were making at the start of the year.

Although a tentative ceasefire in the Gulf has been in place since April, oil prices remain elevated and even if a permanent resolution is found, it may take many months for oil supplies to return to levels seen before March. The supply shortage is also placing further pressure on global oil reserves, which is likely to keep inflation comfortably above the Bank of England’s CPI target of 2%.

We have all seen the impact of conflict in the Middle East when buying petrol or through household energy bills. The impact of these costs ripple through manufacturing, logistics and services, leaving businesses with a choice of either absorbing the higher costs, or passing these on. Food inflation is also set to rise far above the target rate, as farmers pass on the cost of fertiliser where prices have risen by almost 25% since February.

The hikes in the cost of essentials could lead to workers demanding higher wages to compensate and could lead to so-called “second-round effects” which further reinforces the upward pressure.

The hidden drain on investment returns

Many investors fail to keep the prevailing rate of inflation in mind when assessing the real performance achieved from an investment strategy. Whilst returns of 5% per annum may look attractive when taken at face value, if inflation runs at 4% per annum over the investment period, the real rate of return is effectively 1%.

Inflation has a variable impact on different asset classes. Where funds are held as cash, interest rates and inflation tend to move in the same direction, and over the longer term, simply holding cash savings may lead to a negative real return when the impact of inflation is taken into account.

Fixed income investments, such as government and corporate bonds, are also vulnerable to the eroding impact of inflation. Most bonds pay a fixed rate of interest, which may become less attractive in real terms in periods of higher inflation. As a result, bond prices can come under pressure. The same can be said for commercial property investments, where rental income is typically fixed for the duration of a lease.

As companies tend to raise their prices to protect their margins when inflation is elevated, equities can act as a hedge against rising inflation. Such conditions tend to favour companies with genuine pricing power. Likewise, infrastructure can prove more resilient as the cost of long-term maintenance contracts are often inflation linked.

The impact of inflation on the wider economic outlook also plays a key role in how different asset classes perform. If consumers react negatively to the effects of higher inflation and reduce spending, this can hurt the profits of those companies that rely on buoyant consumer confidence and dent the outlook for growth across the wider economy.

Protecting your portfolio

Investment markets are often able to withstand a modest bout of short-lived inflation; however, the longer inflationary pressures persist, the greater the impact. It is also worth remembering that investment markets are a predictive mechanism – investors are considering returns in the future, and if the outlook appears to worsen, investor sentiment may weaken.

There are, however, ways to protect your investments against inflation. In the case of cash savings, ensuring that savings are held in accounts paying attractive rates of interest can help offset at least some of the eroding impact of higher inflation. Accepting low interest rates in a period when inflation is higher, is likely to reduce the real spending power of savings.

Holding bonds with shorter durations can help avoid the worst impact of an extended bout of higher inflation, as they are less sensitive to upward movements in interest rates, which is often a policy response by central banks.

Whilst acting as a modest hedge against inflation, equity values can come under pressure from wider concerns over the health of the economy and outlook for interest rates. As shown during 2022, when the S&P500 index fell by over 18%, the level of insulation provided may be limited; however, companies in sectors with resilience and pricing power could outperform in such conditions.

Investment markets have enjoyed strong returns over recent months, building on the solid performance in 2025. Whilst inflationary fears persist, these are currently being somewhat overlooked, given the continued investor confidence in areas such as Artificial Intelligence; however, the longer energy prices remain elevated, the greater the likelihood that investor focus will shift to the wider economic impact.

Through our CDI discretionary managed portfolios, the FAS Investment Committee have taken a relatively cautious position across the range of models. The Committee have maintained an overweight position to short-dated bonds across fixed income allocations for the last 12 months and have positioned equity allocations to provide exposure to more value and defensive strategies to complement positions in high growth areas. Higher levels of cash are also being held across the range of CDI portfolios.

If you wish to discuss how your portfolio is positioned, then speak to one of the team to start a conversation.

The popularity of ethical investment strategies has seen significant growth over recent years, as more investors aim to align investments with their own values. During 2025, however, socially responsible funds suffered significant outflows as investors grew increasingly concerned about performance. Defence and weaponry and fossil fuel energy were amongst the best performing sectors over the last year, neither of which would generally feature in a socially responsible investment strategy. As a result, ethical strategies have struggled to match the performance achieved through a mainstream investment approach.

Whilst performance considerations are clearly important, the availability of investment solutions that meet the necessary criteria is another key factor. Tighter regulation of sustainable investments has been seen across regulatory frameworks, including the introduction of the Sustainability Disclosure Requirements (SDR) that have encouraged fund managers to apply for a sustainable label, which helps to demonstrate the fund’s commitment to socially responsible investment. As a result, several leading fund managers have changed their fund mandates to remove ethical screens.

At FAS, we have always taken a common-sense approach to sustainable investment. We appreciate that investors may wish to hold a portfolio that aims to make a positive impact on the World in which we live, and for those with strong ethical considerations, we can build a bespoke advisory portfolio which meets strict criteria.

The CDI Future portfolios

We also provide discretionary managed options for clients wishing to invest in a socially responsible manner. When designing the socially responsible CDI discretionary managed portfolios, the FAS Investment Committee considered feedback from many clients, who expressed the desire to invest with a conscience, without wishing the ethical criteria to be too restrictive that it narrowed the available universe of investment options significantly.

The CDI Future Balanced and CDI Future Progressive portfolios are both designed to provide growth over the longer term, by investing in Collective Investments holding a blend of UK Equities, Global Equities, Corporate Bonds and Infrastructure investments. Future Balanced has a maximum equity allocation of 65% and caters for clients wishing to accept medium levels of investment risk. Future Progressive holds up to 85% in equities.

In both cases, the Investment Committee aim to invest at least 70% of each portfolio in funds that either actively screen their portfolio to avoid common areas of concern (such as fossil fuels, tobacco, gambling and weaponry amongst others) or track an index where the composition of the index is screened to remove stocks that fail to meet the necessary ethical criteria. We feel this allocation reaches a sensible compromise, ensuring that more than two-thirds of the portfolio meets rigid criteria, whilst allowing a smaller proportion of the portfolio to be invested in sectors and regions of the World where ethical investments options are less common, such as the US or Asia.

The portfolios are constructed in the same manner as the other CDI portfolios, by selecting funds from across the whole of the market. Funds that pass the quantitative filtering process are then subject to additional screening. For actively managed funds, careful consideration is given to the socially responsible investment approach adopted and how the fund manager applies the various restrictions. In the case of passive funds, additional due diligence is undertaken to consider the screening process adopted by the index creator.

The performance cost of sustainable investing

The CDI Future portfolios have both consistently outperformed the respective benchmark for each portfolio over both 1 and 3 years. The Investment Association benchmarks are themselves not subject to the restrictions of ethical screening, and therefore the comparative performance achieved by the two Future portfolios is impressive.

Performance against the benchmark does, however, only tell half of the story. The two charts above and below also plot the performance of CDI Balanced Growth and CDI Progressive Growth, which carry the same level of risk as CDI Future Balanced and CDI Future Progressive respectively, and are constructed using the same investment process – but without the socially responsible screen. As demonstrated by the relative performance, investing in a socially responsible manner has historically led to a performance penalty against the returns an investor not taking ethical considerations into account has achieved.

What lies ahead for ethical investment

We live through uncertain times, with conflict in Europe and the Middle East likely to lead to continued investor demand for stocks that do well as a result of the ongoing geopolitical turbulence. In the short term, it is difficult to see the performance gap between ethical and mainstream investment strategies narrowing significantly.

The CDI Future portfolios have, however, demonstrated consistent outperformance of the wider sector benchmarks, and provide a robust solution for investors who wish to limit their exposure to companies whose products and services have a negative social or environmental impact. The FAS Investment Committee also regularly analyse the performance of the CDI Future portfolios against sustainable and responsible investment mandates offered by leading portfolio managers, to ensure the performance of our discretionary managed services remains consistently strong against real-world competitors.

If you wish to invest in a socially responsible way or wish to discuss the potential implications of adopting a sustainable investment approach, then speak to one of our experienced advisers. We can offer both discretionary managed and advisory investment approaches that aim to meet concerns over portfolio sustainability and would be pleased to provide an unbiased review of an existing portfolio.

As anyone who runs a business will appreciate, time is a precious commodity. Making strategic decisions, effectively managing staff, and building relationships with customers and suppliers mean that business owners rarely have time to consider the important role financial planning can play in both the success of the business and the long-term financial security of key individuals.

Failing to consider financial planning can not only have financial implications but could jeopardise the long-term resilience of the business. Making the appropriate decisions can meaningfully improve the health of your business and protect the people within it. We look at three key financial planning considerations for business owners.

Protecting your interests

In our experience, many business owners, shareholders, and key personnel are running significant risks by not holding adequate protection should the worst happen. The death or serious illness of a business owner or key individual could have devastating consequences for the future success of the business and its employees; however, this potential risk is all too often overlooked.

A situation we commonly come across is where a shareholder in a small business leaves their shares to a spouse on death; however, the spouse may have no interest in becoming a shareholder and would prefer to sell those shares to the remaining shareholders. This creates an immediate problem as the surviving shareholders must raise the finance to purchase the shares, which can be prohibitive. By arranging shareholder protection in an appropriate manner, life assurance can be structured in a tax-efficient way to provide the necessary funds for the surviving shareholders to buy the shares directly from the spouse, ensuring continuity for the business and a fair outcome for the family.

Another common risk that is often ignored is the potential impact of the death or serious illness of a director, owner, or key member of staff, whose expertise, relationships, or skills are central to the business’s day-to-day operation. Without appropriate cover, the business could face significant damage to its profitability at an already difficult time. Key person insurance can cover this eventuality by paying proceeds to the business should a key employee fall seriously ill or die. The claim proceeds can be used to help cover recruitment costs, lost revenue, and the operational disruption that inevitably follows.

Benefits to retain key staff

A crucial component of any successful business is the ability to recruit and retain key staff. Salary alone is rarely enough to attract the most suitable candidates, and a well-structured benefits programme can be the deciding factor in recruiting and keeping the people your business depends on.

Death in Service, essentially a group life policy, is a cost-effective way of providing meaningful life assurance cover for employees. It is valued highly by staff, and their families, yet remains relatively straightforward and affordable to arrange. Similarly, a Group Private Medical Insurance policy is an attractive benefit that serves both the employee and the employer, as employees gain faster access to diagnosis and treatment, while the business benefits from reduced absence and a quicker return to full productivity.

Another cost-effective, yet valuable benefit is to provide enhanced pension arrangements for key personnel. Many firms use a Master Trust arrangement such as NEST or People’s Pension to meet their auto-enrolment obligations, and whilst these schemes may be cheap to operate from the perspective of the company, they offer employees limited investment choice and can carry higher charges. By providing key staff with bespoke pension advice and setting up a Group Personal Pension or individual arrangements, employers can offer greater flexibility, more competitive terms, and can demonstrate that they value their people’s long-term financial wellbeing.

Business owners’ retirement plans

Business owners are often so focused on the success of their business that they can neglect their personal finances, and in particular, their exit strategy and retirement plans. Business owners can save for retirement in a tax-efficient manner by making regular pension contributions. Depending on how the business owners are remunerated will determine the most tax-efficient way that pension contributions are made. For limited company directors, employer pension contributions can be paid directly from the business and treated as an allowable business expense, reducing the corporation tax liability in the process. This route is particularly tax efficient.

Pension planning can be a particularly useful tool as business owners near retirement, providing a tax-efficient method of extracting retained profits from the business rather than taking a large taxable dividend or salary. With careful planning, it is possible to make significant contributions to boost a substantial retirement fund while simultaneously reducing the company’s tax burden.

How we can help busy business owners

In our experience, business owners generally appreciate the benefits that independent financial planning can bring but rarely have the luxury of time to explore these options in sufficient depth. Managing the day-to-day demands of running a business leaves little time to consider the bespoke financial planning advice that can provide peace of mind for business owners.

As a Chartered, independent practice, we provide a comprehensive service that considers a company’s protection needs, the implementation of employee benefits packages, and a thorough review of business owners’ personal finances. Rather than requiring business owners to manage each of these elements separately, dealing with multiple advisers and providers, we can cover all areas, accessing the most appropriate products and solutions from across the marketplace.

If you are interested in speaking with one of our experienced financial planners to review your business needs, please get in touch. We would welcome the opportunity to show you what a difference well-structured financial planning can make.

We have taken the opportunity to closely review the range of CDI discretionary managed portfolios over recent weeks, focusing on strategies designed to suit investors who are happy to accept medium levels of risk, or indeed wish to invest more defensively with a focus on income. This week, we take a closer look at a more growth-orientated and equity heavy strategy, namely CDI Progressive Growth.

The key to long term performance

When considering the long-term performance of different asset classes, equities have historically demonstrated superior returns to cash or government bonds. According to data collated within the Barclays Equity-Gilt Study, which analyses UK investment returns from 1899, equities have historically outperformed cash nine times out of ten over any given ten-year period over the last 125 years.  Once you add in the compounding effect of growth, and the power of reinvested dividends, there is clear evidence that supports the benefit of holding higher weights in equities, when seeking capital growth over the longer term.

Equity investment does, however, come with a trade-off, in the form of increased volatility. Whilst global markets have performed well over the last two years, we only need to look back to 2022 (Russia-Ukraine), 2020 (Covid), 2006-8 (Great Financial Crisis) and 2000-2 (Dot Com Bubble) as recent examples where global equity markets have suffered a sharp temporary pullback.

By introducing an element of diversification into other asset classes, which historically produce less volatility, the overall risk within a portfolio can be reduced. For those investors happy to accept medium to high levels of investment risk, and hold most of their portfolio in equities, the CDI Progressive Growth portfolio may be an ideal solution.

CDI Progressive Growth

The CDI Progressive Growth portfolio is designed to provide a broad diversified exposure to global investment markets, by investing in a range of active and passive funds. The aim is to produce capital growth over the longer term.

As with the other CDI mandates, the portfolio is constructed by the FAS Investment Committee, who consider funds from the whole of the market. Using quantitative filters, the available fund universe is narrowed to a select range of funds, which are then rigorously assessed before being considered for inclusion.

The CDI Progressive Growth portfolio can hold a maximum allocation of 85% in equities; however, the Committee have taken a tactical decision to reduce exposure to US equities since last August, which results in the portfolio holding a current equity allocation of 76%. This allocation is spread across different geographic regions, with 25% currently held in US equities, 16% in UK equities and 15% allocated to both the European and Asia Pacific (including Japan) regions. The balance of the portfolio is held in global fixed income, with a current allocation of over 7% in cash. Usually, the portfolio would run with cash levels of around 2%; however, the Committee have taken the tactical decision to hold higher weights in cash, amidst the current global uncertainty. The graphic below demonstrates the extent of the diversification within the portfolio.

All CDI portfolios adopt a blended approach, holding allocations to actively managed funds where the Committee feel additional returns can be generated, and passive exposure where appropriate. CDI Progressive Growth is no exception, holding a broadly equal split between both investment styles. As a result, the weighted fund charge of the portfolio is currently 0.36% per annum, which is highly competitive for a blended, conviction-style investment approach.

Portfolio Performance

The CDI Progressive Growth portfolio has consistently outperformed the representative sector benchmark, the Investment Association Mixed Investment 40-85% shares sector, over the short, medium, and longer term, as demonstrated in the chart below. Whilst performance is, of course, of key importance, the FAS Investment Committee also ensure that the level of volatility and risk within the portfolio remains broadly in line with the sector average.

The FAS Investment Committee regularly review the performance of the CDI portfolios against managed portfolio services offered by leading UK portfolio managers. When analysing a client’s existing arrangements, we can very often demonstrate performance that is consistently strong when measured against industry peers and also offers good value for money.

CDI Progressive Growth in action

The CDI Progressive Growth portfolio may be an appropriate option for longer-term investments for individuals and trustees, who are comfortable to accept a degree of volatility. The modest allocations to fixed income provide some diversification, which separates the portfolio from a pure equity growth strategy.

We have found the most common application for the CDI Progressive Growth portfolio is where individuals transfer existing pensions or investments, seeking improved performance.

Portfolio allocations of around 80% in equities are common amongst many default pension strategies and likewise, investment managers often gravitate towards a similar level of equity exposure for their balanced and medium risk strategies. By transferring existing arrangements, clients find that CDI Progressive Growth closely matches the asset allocation of their old plan, adopting a similar level of risk as they did prior to transfer.

If you hold existing pension savings, or investments within an Individual Savings Account (ISA) or General Investment Account, benchmarking not only performance, but risk, drawdown and costs on a regular basis can help identify whether your investments are on track to meet your goals.

Our independent advisers can help in this process, by undertaking an impartial review of an existing portfolio and provide an unbiased assessment of performance against the CDI portfolio range. Speak to one of the team to start a conversation.

Inheritance Tax planning is becoming an increasingly important financial consideration for many families. Faced with static nil-rate bands, rising asset values, and forthcoming legislative changes, planning to avoid punitive taxes on death is at the top of the agenda in many financial reviews. Inheritance Tax liabilities can, however, be mitigated through a series of different measures, with gifting being perhaps the most efficient and straightforward way of reducing a potential liability to Inheritance Tax.

Everyone can make capital gifts up to a total of £3,000 per tax year without the value being added to their potential estate. In addition, you can give multiple gifts of up to £250 per person each tax year, provided you have not used another allowance on the same person. Capital gifts above these allowances become Potentially Exempt Transfers, where Inheritance Tax may be payable if you die within seven years of making the gift.

Avoid passing the burden to the generation below

Children are likely to be the most logical recipient of gifts, as it is natural to give assets to the generation below; however, what many donors fail to realise is that their children may, themselves, have an Inheritance Tax problem. This may well be exacerbated once unused pension values are included in estates for Inheritance Tax purposes from April 2027. By gifting funds to their children, they may simply be transferring the Inheritance Tax burden from one generation to another.

As a result, more grandparents are opting to skip a generation and pay gifts directly to grandchildren.

Where the recipient of the gift is below the age of 18, grandparents can fund a Junior Individual Savings Account (ISA) for their grandchildren. A Junior ISA has an annual subscription limit of £9,000 and allows investments to grow tax-efficiently, and as the Junior ISA converts to an ISA once the child reaches the age of 18, funds can remain tax-efficient.

A common concern raised when funding Junior ISAs is the fact that the child automatically gains control of the investment at a time when they may not be mature enough to make sensible financial decisions. Where greater control is preferred, gifts can instead be made into a Discretionary Trust, from where the Trustees can advance capital to the grandchild at a time when funds are needed for a specific purpose, or the Trustees feel the beneficiary will make a responsible decision to spend the funds wisely.

Where grandchildren are older, gifts from grandparents could make a significant difference to a generation who may be grappling with student debt, or budgeting to cope with higher mortgage rates when looking to secure their first home. In addition, by funding a house deposit or paying towards the costs of further education, the grandparent also indirectly helps their children, as this financial need typically coincides at the same time as parents are trying to focus on their own financial security, be it clearing an outstanding mortgage or funding their plans for retirement.

How Grandparents can restructure their investments

Altering existing investment strategies can help optimise the benefit of gifts made to grandchildren in a tax-efficient manner. In addition to the capital gift allowances, gifts out of surplus income can be free from Inheritance Tax from the point the gift is made. There are, however, strict criteria that need to be fulfilled to benefit from this generous tax treatment. The gifts must form part of normal expenditure, and a pattern of regular gifting needs to be established to demonstrate that the gifts are being made from surplus income. In other words, it must leave the donor with sufficient income to maintain their usual standard of living.

Investment strategies that generate an attractive stream of natural income can help provide additional income for gifting purposes. Rearranging Individual Savings Accounts (ISAs) and General Investment Accounts into higher yielding investments, producing a natural income yield of between 4% and 5% per annum, can generate additional income that could potentially be gifted under the gifts out of surplus income rules.

Another planning exercise is to consider taking action with unused pension funds. As pensions are exempt from Inheritance Tax under the current legislation, it has often been sensible advice to leave pensions that are not needed to provide an income in retirement in place, as they would pass without Inheritance Tax applying on death; however, unused pension funds come under the scope of Inheritance Tax from April 2027, and many are considering shifting plans to adjust to the new rules. Firstly, Tax Free Cash can be drawn to fund capital gifts or be placed into Trust for future generations. Alternatively, the pension holder can invest the Tax-Free Cash to produce income that can fund gifts out of surplus income.

In addition to Tax Free Cash, drawing pension income under Flexi-Access Drawdown or an annuity could provide income for gifting purposes. The pension holder does, however, need to consider the income tax implications of generating additional pension income, given their personal financial circumstances.

The benefit of holistic advice

Gifting to grandchildren can help family wealth cascade down through generations. There are, however, decisions that need to be made in respect of the timing of gifts and the best route to ensure that the recipient uses funds appropriately. By actively reviewing the structure of existing investments and pensions, the benefits of gifting can be enhanced and made more tax efficient. Holistic independent financial planning advice can prove invaluable in navigating the range of options available, and our experienced advisers can provide unbiased advice on the most appropriate gifting strategies designed to preserve family wealth. Speak to one of the team to start a conversation.

Over the course of a working life, most of us accumulate pension pots scattered across multiple providers. Moving between jobs usually leaves behind a deferred pension arrangement and depending on the length of service with any single employer, this may result in several small pots that are difficult to track, monitor, and plan around.

As a result, it may be tempting to combine these pots together into a single arrangement to simplify your retirement planning, which can prove beneficial; however, pension consolidation is certainly not right for everyone, and careful consideration is needed before taking any action.

Benefits of consolidation

Perhaps the most immediate improvement pension consolidation can bring is clarity. By holding a single pension arrangement, rather than pots with different providers, you can readily understand the combined value of the personal pension arrangements, making it far easier to track performance. Holding a single pension arrangement can also bring administrative benefits, too.

The low-cost platform pensions available today bear little resemblance to older style pension arrangements. Many contracts arranged in the past carry high annual management charges when compared to their modern equivalents. We often come across legacy pension arrangements where annual management charges of 1% per annum or more are levied, on top of monthly plan fees. When compared to the cost of modern style pension arrangements, the additional charges levied can eat into investment returns, which compound over many years.

Pension legislation has seen many changes over the last decade, and those reaching retirement now have a greater choice when deciding how to draw pension benefits. Older pension arrangements which pre-date the legislative changes may not provide the full range of options available to newer pension plans, and limit access to features that could increase income and aid tax-efficiency in retirement.

Another stark contrast between older pensions and modern contracts is the range of investment options. When assessing an existing client’s pensions, we frequently review legacy plans that offer a very restricted range of investment funds, which seldom offer reasonable performance. Modern pension contracts typically offer access to a much wider choice of funds, from passive to actively managed, and open architecture platforms provide access to funds from across the whole of the market. From the additional choice available, it is far easier to construct a portfolio that aims to outperform over the longer term.

To demonstrate the impact of charges and performance over the longer term, take the example of Richard. He is aged 35, and is looking to review his deferred pension, seeking improved performance and cost efficiency, without altering the level of risk. Richard transfers the deferred pension, valued at £100,000, to a low-cost platform pension and no further contributions are made to the pension post transfer. The transferred plan is invested in a portfolio of good performing funds, and produces a net annual return of 6% per annum (net of charges). The older style arrangement from which he transferred, underperforms the new arrangement by 1% per annum and also carries an additional cost of 0.5% per annum when compared to the charges on the new contract. On reaching 65, Richard reviews the comparative performance of the two pensions and is surprised to see the difference in value between the older, more expensive, pension and his new style arrangement is over £183,000. Put another way, this could provide Richard with an additional £9,000 per annum in retirement via Flexi-Access Drawdown or an Annuity.

The pitfalls

Pension consolidation may provide tangible benefits; however, depending on the arrangements held, disturbing an existing pension can cause financial harm. In particular, some pension contracts established many years ago provided guaranteed benefits, which may be lost on transfer.

Amongst these valuable benefits can include Guaranteed Annuity Rates, which provide the right to convert the pension pot into an annuity that may offer improved rates over those available on the open market, or Protected Tax-Free Cash, where the individual can take more than the standard 25% of the value of the pension as Tax-Free Cash.

The timing of any consolidation exercise also carries risk. Moving pensions between different providers and schemes leads to a period when the pension funds are not invested. This “time out of the market” could work in either direction depending on the performance of underlying market conditions, and therefore it is important to ensure that the period when not invested is kept to a minimum.

When to consolidate

Many people leave pension consolidation until the run-up to retirement, when the focus on providing an income in later life sharpens. Streamlining existing pensions as you near retirement can be highly beneficial, as building a cohesive retirement strategy across multiple plans often adds complexity. That said, given the potential benefits of lower costs and improved prospects for performance, consolidating deferred pensions after a change of job may also be a sensible course of action; however, if you are still an active member of the pension you look to transfer, this may lead to loss of employer pension contributions. It is, therefore, sensible to leave any consolidation until you have left employment and have ensured that no further contributions are due to be paid into the pension.

The importance of advice

Accumulated pension savings represent contributions made throughout a working life and form the backbone of many retirement plans. It is, therefore, important to seek appropriate advice before considering whether to take action on deferred pensions, to avoid making a potentially costly mistake.

Our experienced advisers can carry out a full audit of your existing pension arrangements and provide an independent and unbiased assessment of the features, fund availability and performance, and retirement options. We can access low-cost platform pension arrangements offering whole of market fund choice, and all retirement income options available under pension freedom legislation. Speak to one of our team to discuss your existing pensions so that you can plan ahead with confidence.

When designing the CDI portfolio range, the FAS Investment Committee aim to provide a diverse range of strategies designed to fit the varied needs of our clients; however, market conditions themselves can sometimes dictate an increased demand for a particular portfolio solution.

This was the case at the end of 2020, when global financial markets were grappling with the impact of the Covid-19 pandemic. At this time, central banks around the World cut interest rates aggressively to combat the economic downturn, with the Bank of England reducing the base rate to just 0.1% in March 2020. Savers holding significant cash deposits, or those who use cash interest to boost other income sources, were left facing the choice of either accepting the ultra-low levels of interest from cash, or seeking alternative options. This led to increased demand for a lower risk discretionary mandate, designed to provide attractive returns when compared to cash deposit, and led to the inception of the CDI Cautious portfolio in January 2021.

CDI Cautious in detail

The CDI Cautious portfolio primarily invests in fixed income investments, focusing on short-dated Corporate and Government bonds, together with Money Market deposits, an allocation to Global and UK equities and alternative investments. The aim is to generate an attractive level of natural income, together with some capital appreciation over time, whilst maintaining low levels of volatility. As with all CDI portfolio mandates, the FAS Investment Committee are free to allocate the portfolio across different geographic sectors or regions; however, the portfolio mandate dictates that no more than 20% of the portfolio can be held in equities.

Currently, almost two-thirds of the portfolio is invested in fixed income, with most of this allocation investing in global, rather than UK, bonds. In line with the current strategy adopted by the FAS Investment Committee across the CDI range, the bond allocation is focused on short-duration bonds, where the period to redemption is five years or less. This approach aims to minimise the impact of inflation risk, whilst still capturing the attractive income yields available. Given the risk profile of the CDI Cautious portfolio, the fixed interest allocations are almost entirely held in investment grade bonds, with only a small allocation to high yield issues.

Currently, over 16% of the portfolio is held in cash, with most of this allocation held in Money Market funds. These funds aim to preserve capital and produce modest returns by investing in short-term corporate and government debt, certificates of deposits and other short term debt instruments, and typically offer slightly better returns (net of fees) than overnight cash deposit rates.

Whilst the maximum allocation to equities is 20%, the portfolio currently holds just 14% in equities, spread geographically across the UK, North American, European and Asia Pacific regions. As active fund managers can focus their portfolios on more defensive and value positions, the FAS Investment Committee prefer to allocate a higher weight to actively managed funds in this portfolio, with just over one-quarter of the current equity allocation held in passive funds. Despite the higher allocation to active funds, the portfolio carries a competitive ongoing fund charge of just 0.32% per annum.

Portfolio Performance

Measuring performance over the last three years to 12^th May 2026, the CDI Cautious portfolio (shown in black on the graph below) achieved a total return of 25%, which is comfortably above the returns achieved by the sector benchmark, the IA Mixed Investment Sector 0% to 35% shares (shown in pink). Also shown on the graph below is the Bank of England Base Rate (green line) which represents cash returns over the same period.

Given the investment approach and objectives of the CDI Cautious portfolio, the FAS Investment Committee pay particular attention to the impact any changes to the portfolio have on portfolio volatility, and maximum drawdown. As shown in the graph below, the CDI Cautious portfolio has produced strong risk adjusted returns, not only outperforming the representative benchmark over the last three years but keeping the level of volatility around 25% less than the volatility displayed by the benchmark over this period.

Portfolio appeal

The CDI Cautious portfolio was designed to meet the needs of those seeking returns that are superior to those available on cash deposit, without being exposed to significant levels of investment risk. Given the asset allocation, the portfolio maintains an attractive natural income yield, currently yielding 4.42% per annum.

The appeal of this portfolio is not, however, confined to investors with a lower appetite for investment risk. The portfolio also lends itself well as a smaller satellite portfolio to a more balanced mainstream core portfolio for specific client circumstances. For example, an investor heading towards retirement may wish to carve out a section of a larger pension portfolio into assets with lower volatility, which will be drawn in the short to medium term through Flexi-Access Drawdown.

The CDI Cautious portfolio may also be an ideal option for corporate investments, where directors look to keep surplus funds held within a business productive, and for Trusts, where Trustees seek an attractive level of income for a life interest beneficiary whilst limiting portfolio volatility.

Time for a fresh approach

If you hold surplus savings, that you wish to keep productive without taking excessive risk, or wish to diversify part of a larger portfolio into lower risk assets, then the CDI Cautious portfolio may be an option to consider. Likewise, defensively minded investors who hold portfolios through alternative managers, should regularly review both the performance of their investments, but also the level of risk to which they are exposed. Speak to one of the team to start a conversation about the CDI Cautious portfolio, or any of the portfolios in the range.

The objective of many investment strategies is to focus on capital growth. Whilst this may well be appropriate for those accumulating pension savings or investing for the next generation, there is often an increased need for additional income to supplement pension income as we move into later life.

Retirees are not the only cohort where income production carries greater importance. Trustees of interest in possession trusts need to ensure that life tenants receive an attractive and consistent level of income. Higher levels of natural income can also allow greater gifts out of surplus income for Inheritance Tax (IHT) planning. Finally, individuals privately funding long term care could narrow the shortfall between pension income and care fees by selecting high yielding investments.

The CDI portfolio range includes four portfolios designed to provide investors with an attractive and consistent level of income. Whilst the portfolio income yield is a key consideration during the portfolio construction phase, the FAS Investment Committee also aim to ensure that capital growth is also targeted, as a hedge against inflation. Furthermore, as capital values increase over time, additional income can be generated from the higher capital value.

Our risk-rated options

Our advisers regularly review discretionary managed portfolios offered by alternative managers that are aimed at investors seeking income. All too often, these portfolios offer disappointing levels of natural income. The three core income options offered within the CDI portfolio range have been specifically designed to meet the needs of investors seeking a balance between capital appreciation and providing an attractive and sustainable income yield.

• CDI Defensive Income takes a low-to-medium risk approach, investing up to 35% of the portfolio in global equities. The balance of the portfolio is invested in global fixed interest securities, cash and alternative investments, to provide good levels of diversification. As a result, the portfolio has historically only displayed moderate levels of volatility. The current income yield offered by this portfolio is 4.02% per annum.

• CDI Balanced Income takes the middle ground between risk and reward, investing up to 65% in equities, and is suitable for investors comfortable with medium levels of risk and volatility. Given the increased allocation to equities, this portfolio offers a greater balance between capital appreciation and income production than CDI Defensive Income. Nonetheless, the portfolio offers an attractive yield, which is currently 3.44% per annum.
• CDI Progressive Income has a higher allocation to equities than CDI Balanced Income, allocating up to 85% in equities. This provides additional scope for capital appreciation, whilst maintaining an attractive income yield, and is suitable for those investors who are comfortable taking a medium-to-high level of investment risk. Despite the greater allocation to equities, the portfolio currently provides an attractive income yield of 3.27% per annum.

The consistent and disciplined approach adopted by the FAS Investment Committee considers the levels of volatility within every CDI portfolio at each quarterly review stage, to ensure that they remain consistent with the levels displayed by the benchmark. When undertaking the quarterly portfolio review of the CDI Income models, the Investment Committee take additional care to consider the impact of any changes on the investment portfolio income yield.

The three core Income portfolios continue to outperform the representative IA sector benchmarks over the short, medium and longer term. The table below demonstrates the total return (i.e. capital growth and income) achieved over the last 1, 3 and 5 years.

Performance data to 5^th May 2026 Source: FE Analytics May 2026 – figures are net of fund charges, but do not include adviser or platform charges.

CDI High Income

Changes to the way pensions are treated for IHT purposes are leading many to reconsider their financial plans and making gifts out of surplus income is one method of reducing a potential IHT liability. As a result, we have seen growing demand for a discretionary managed portfolio that offers an even higher level of natural income.

The CDI High Income portfolio, which was introduced last year, holds around 40% in equities, with the balance held in fixed income, and contains an increased allocation to high yield bonds than in the core risk-rated mandates. The aim of the portfolio is to generate an income yield that comfortably exceeds the yield on the other three CDI income portfolios. To achieve this, the portfolio composition is naturally focused more closely on income production, although the portfolio also retains prospects for capital appreciation over the longer term. The current portfolio yield is 4.92% per annum.

Consistency of income

When investing to generate natural income, investors need to be mindful that the amount of income paid will differ from month to month. This is unavoidable, as investment funds offer different income payment schedules, with some paying monthly, others quarterly and a smaller number pay income twice a year. Furthermore, as the composition of the underlying portfolio within any fund will change over time, so will the level of income generated.

Despite these challenges, the FAS Investment Committee aim to keep the level of natural income paid by each of the four income portfolios consistent from quarter to quarter, so that investors can estimate their likely income with a degree of accuracy. The graph below shows the historic income yields generated by CDI Defensive Income, CDI Balanced Income and CDI Progressive Income since 2024, and the CDI High Income portfolio since it was introduced last autumn. As demonstrated, each of the portfolios has maintained a consistent level of natural income from quarter-to-quarter.

If you are disappointed by the level of natural income yield you receive from a portfolio designed to generate income, it may be a good time to review the investment approach adopted. Our independent advisers can undertake an impartial performance review of an existing portfolio and provide an unbiased assessment of performance against the CDI portfolio range.

Source: FE Analytics May 2026

In the weeks ahead, the FAS Investment Committee will produce a series of articles giving further insight into the investment process behind the CDI range of portfolios, focusing on asset allocation, performance and looking at how the range of portfolios meets the differing needs, circumstances, and objectives of our clients. In the first of the series, we go under the bonnet of the CDI Balanced Growth portfolio.

FAS Investment Committee process

Investment markets have experienced significant changes over the 35 years since the inception of FAS; however, in the face of changing market trends, which has driven many to adopt a passive-only approach, we remain firm advocates of the benefits of conviction-based investment. The FAS Investment Committee remain steadfast to these core principles that have guided our investment fund selection for more than three decades, and this investment process forms the foundation of the CDI range of discretionary managed portfolios.

When constructing the CDI portfolios, the Investment Committee use the independent status that FAS enjoys, to consider fund solutions from across the whole of the market. All funds available to UK investors are fed through a quantitative screening process every quarter, which continues to be refined and adjusted. Those funds that pass the filtering process are then rigorously assessed before they can be considered for inclusion within a CDI portfolio. Consistently strong fund performance is, naturally, a key factor; however, the Committee also factor in risk, volatility, concentration risk and costs when creating and refining the CDI portfolios.

Asset allocation

Maintaining adequate diversification is a key consideration when the FAS Investment Committee adjusts the allocations within any of the CDI portfolios; however, the medium risk approach adopted within the CDI Balanced Growth portfolio allows for a very high degree of diversification. The portfolio can invest a maximum of 65% in equities, although the Committee have taken a tactical decision over recent quarters to reduce exposure to US equities, leading to a current equity allocation of just under 55%. Whilst the portfolio will generally allocate 2% to cash, the decisions of the Committee have led to a temporary balance of 6.7% in Cash, which remains productively held in money market funds.

In addition to diversification across asset classes, the CDI Balanced Growth portfolio also allocates funds across all regions of the World. Whilst the Investment Committee are not constrained by geographic limits, the medium risk and balanced approach would ordinarily dictate that a higher proportion of the portfolio will be allocated across developed markets in North America, UK, Europe, and developed Asia.

As is the case in every CDI portfolio, the Committee aim to blend our preferred conviction investment style, through active managers, with passive funds that provide broad market exposure. As a result, the weighted fund charge of the portfolio is 0.35%, which is highly competitive for such a blended investment approach. In addition, the Committee continue to work with leading fund managers to access lower cost share classes where possible, with the aim of reducing the total portfolio cost of ownership.

Portfolio Performance

Measuring performance over a five-year period from 1^st April 2021 to 1^st April 2026, the CDI Balanced Growth portfolio (shown in green on the graph below) achieved a total return of 40.21%, which was more than double the 19.87% returned by the representative benchmark, the IA Mixed Investment Sector 20% to 60% shares (shown in red).

In addition to benchmarking the CDI portfolios against the IA sector benchmarks, we undertake a regular process which reviews our performance against managed portfolio services offered by leading UK portfolio managers. This process aims to ensure our services offer good value for money and performance remains consistently strong against real-world competitors.

Naturally, performance is the key metric on which we, and of course our clients, will focus; however, the level of risk taken to achieve returns is an important consideration. The FAS Investment Committee consider levels of volatility at each quarterly review stage, to ensure that they remain consistent with the levels displayed by the benchmark. Where changes are made to the portfolio each quarter, the impact of the change on the historic maximum drawdown and value at risk is carefully considered.

Practical applications for the CDI Balanced Growth portfolio

As the most popular CDI mandate, CDI Balanced Growth is an appropriate solution for anyone seeking capital growth wishing to take the middle ground between risk and reward. The portfolio’s diversification allows good levels of participation in rising markets, and allocations to investment grade corporate bonds and cash provide balance and aim to reduce drawdown in periods of market instability. This makes the Balanced Growth portfolio an ideal choice for pension funds, particularly in the pre-retirement phase, trusts and applications where capital growth over the medium term is sought.

Whilst not focused on income production, the asset allocation within the CDI Balanced Growth portfolio will lend itself to providing a modest level of income. The natural gross income yield generated by the CDI Balanced Growth portfolio is currently 3.3%, and therefore those who wish to focus on growth, with income as a secondary consideration, are also well catered for.

If you hold an existing investment portfolio – be it within a pension, Individual Savings Account (ISA) or General Investment Account – it is important to regularly review the performance you have achieved compared to alternative managers. Beyond performance, it is also useful to consider the level of risk to which you are exposed and to determine whether you are receiving good value for money. Our independent advisers can undertake an impartial performance review of an existing portfolio and provide an unbiased assessment of performance against the CDI portfolio range. Speak to one of the team to start a conversation.

Source: FE Analytics April 2026