Investment market update: December 2024

Political instability in Europe and further afield affected investment markets in December. Read on to find out what other factors may have influenced your investment returns at the end of 2024.

Remember to focus on your long-term goals when assessing the performance of your investments. The value of your assets rising and falling is part of investing. What’s important is that the risk profile is appropriate for you and that your decisions align with your circumstances and aspirations.

UK

Hopes that the Bank of England (BoE) would cut its base interest rate before the end of 2024 were dashed when data showed inflation had increased.

Figures from the Office for National Statistics show inflation was 2.6% in the 12 months to November 2024, which was up from the 2.3% recorded a month earlier.

This led to the BoE deciding to hold interest rates despite speculation that a cut was on the horizon. The central bank also said it expects GDP growth to be weaker at the end of 2024 than it had previously predicted.

Data paints a gloomy picture for the manufacturing sector.

According to S&P Global’s Purchasing Managers’ Index (PMI), UK manufacturing hit a nine-month low as output fell for the first time in seven months in November 2024. The decline was driven by new orders falling. Notably, manufacturers are struggling to export their goods, with new orders contracting for 31 consecutive months. Demand has fallen in key markets, including the US, China, the EU, and Middle East.

A survey from the Confederation of British Industry (CBI) indicates that manufacturers aren’t optimistic about the future either. The organisation said orders at UK factories “collapsed” in December to their lowest level since the height of the pandemic in 2020. The slump was linked to political instability in some European markets and uncertainty over US trade policy when Donald Trump becomes president.

Chancellor Rachel Reeves wants to reduce UK trade barriers with the US, stating she wanted to end the “fractious” post-Brexit accord as she went to meet eurozone finance ministers at the start of the month. Closer ties with the EU may benefit some firms that are struggling with exports.

Retailers are also experiencing challenges.

The festive period is often crucial for retailers. Yet, data from Rendle Intelligence and Insights are “bleak” with footfall in the first two weeks of December down 3.1% when compared to 2023. A slew of high street names entered administration in 2024, including Homebase, The Body Shop, and Ted Baker, and the research suggests more could follow suit in the year ahead.

December was a month of ups and downs for investors in the UK stock market.

The month started strong when stock markets increased across Europe on 3 December – dubbed a “Santa rally” in the media. The FTSE 100 – an index of the 100 largest firms on the London Stock Exchange – was up 0.7% despite worries about the economic outlook. EasyJet led the way with a 4% boost.

Yet, just mere weeks later, on 17 December, the FTSE 100 hit a three-week low and lost 0.7%. The biggest faller was Bunzl, a distribution and outsourcing company, which fell 4.6% when it warned persistent deflation would weigh on profits in 2024.

While it might have felt like a bumpy year as an investor, research shows the FTSE 100 has performed well. Indeed, according to AJ Bell, the index had its best year since 2021 and delivered a return of 11.4%. The top performers were NatWest and Rolls-Royce, while JD Sports and B&M were at the bottom of the pack.

Europe

Much like the UK, the manufacturing sector in the eurozone is struggling. Indeed, PMI data shows the sector continued to contract in November 2024 as new factory orders fell. Germany recorded the fastest drop in output and, as the bloc’s largest economy, could drag economic data down.

Dr Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, told the Guardian: “These numbers look terrible. It’s like the eurozone’s manufacturing recession is never going to end.”

Credit ratings firm Moody’s unexpectedly downgraded French government bonds, which are now rated Aa3 – the fourth highest rating – following the collapse of Michel Barnier’s government. MPs had refused to accept tax hikes and spending cuts in Barnier’s Budget.

Moody’s said: “Looking ahead, there is now very low probability that the next government will sustainably reduce the size of fiscal deficits beyond next year. As a result, we forecast that France’s public finances will be materially weaker over the next three years compared to our October 2024 baseline scenario.”

The news, unsurprisingly, led to French bonds weakening.

European markets also benefited from the so-called Santa rally on 3 December.

Germany’s DAX, a stock index of the 30 largest German companies on the Frankfurt Exchange, broke the 20,000-point barrier for the first time, despite a new election being called after the government collapsed. The recent boost means the DAX increased by around 3,000 points during 2024.

Similarly, Paris’s stock market index, the CAC, gained 0.6%. Luxury goods makers, like Hermes and LVMH, were among the biggest risers.

US

Unlike Europe, US manufacturing could give investors something to be optimistic about.

The PMI reading for November 2024 was 49.7, up from 48.5. While this means the sector is still below the 50-mark indicating growth, the signs suggest it’s stabilising and could move into more positive territory in the new year.

The service sector paints an even better picture. The PMI indicated the sector is growing at its fastest pace since the Covid-19 pandemic. Expectations of higher output linked to growing optimism about business conditions under the Trump administration led to a flash PMI reading of 56.6 for December, comfortably placing the sector in growth territory.

The job market also bounced back after disappointing figures in October. According to the US Bureau of Labor Statistics, 227,000 jobs were added to the economy in November, compared to just 36,000 a month earlier.

Yet, inflation continues to weigh on the US. In the 12 months to November 2024, inflation increased slightly to 2.7%.

While the Federal Reserve went ahead with an interest rate cut, taking the base rate to 4.25%, it also suggested it would make fewer cuts than expected in 2025 if inflation remains stubborn. The comments led to the S&P 500 index closing almost 3% down, while the tech-focused Nasdaq fell 3.6% on 19 December.

President-elect Trump is set to take office on 20 January 2025, but his plans are already influencing markets. Indeed, on 2 December, the dollar rallied after Trump warned countries in the BRICS bloc that he would impose 100% tariffs if they challenged the US dollar by creating a new rival currency.

The BRICS bloc was originally composed of Brazil, Russia, India, China, and South Africa, which led to the acronym. They have since been joined by Iran, Egypt, Ethiopia, Saudi Arabia and the United Arab Emirates.

Asia

In a move that shocked citizens, South Korea’s president declared martial law on 3 December, which led to political chaos. The uncertainty led to South Korea’s currency dropping to a two-year low and exchange-traded funds (ETFs), which track the country’s shares, fell sharply. Indeed, the MSCI South Korea EFT dropped by more than 5% in the immediate aftermath.

Outside of South Korea, stock market performances were more positive in Asia.

On 9 December, Hong Kong’s Hang Seng was up by 2% after China said it would implement a more proactive fiscal policy and planned to loosen monetary policy in 2025. The market was also aided by consumer inflation in China falling to a five-month low in November to 0.2%.

On the same day, Japan revised its economic growth upwards, leading to a 0.3% boost to the Nikkei 225 index.

Please note:

This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Investment market update: November 2024

On 5 November 2024, US citizens voted for their next president, and the election had a knock-on effect on investment markets and business prospects around the world.

Republican Party nominee Donald Trump will serve a second term as president of the US. Trump has previously spoken about imposing harsh import tariffs, including a tariff of up to 60% on goods imported from China or a blanket 20% tariff on every US trading partner.

So, it’s unsurprising that the results of the election are being felt across the world. Indeed, Bloomberg’s Commodity Index suggests the prices of industrial metals and commodities have already slumped due to concerns about a “tit-for-tat global trade war”.

UK

The Labour government delivered its Autumn Budget at the end of October, and the repercussions were still being felt at the start of November.

Credit ratings agency Moody’s said the Budget would be an “additional challenge” for public finances as the announcements would do little to boost UK economic growth. It noted there was also a limited buffer if the UK faced a financial shock.

Similarly, S&P stated that public finances would be “constrained” but added that public investment plans could create a more business-friendly environment.

The FTSE 100 dropped to a three-month low on 8 November. This was partly due to retailers suffering losses as it became clear how higher rates of employer National Insurance contributions announced in the Budget could affect profitability. Marks & Spencer saw a 4.5% drop, and Tesco (2.9%), JD Sports (2.7%), and Sainsbury’s (2.5%) all suffered losses too.

On the same day, housebuilder Vistry issued its second profit warning in as many months, after it said cost overruns on building projects were worse than previously thought. This led to its share price tumbling almost 20%.

The headline economic figures released in November indicate the UK is stagnating.

According to the Office for National Statistics (ONS), GDP per head fell 0.1% in the third quarter of 2024 in real terms – the measure is used as an indicator of the country’s living standards.

In addition, ONS figures show inflation increased to 2.3% in the 12 months to October 2024. The rise could mean the Bank of England delays plans to reduce its base interest rate.

Readings from Purchasing Managers’ Indices (PMI) suggest business activity is weakening. However, some businesses may have paused investments and key decisions until the Budget was delivered, so activity could pick up in the final months of 2024.

In October, the British manufacturing PMI had a reading of 49.9 – slightly below the 50 mark that indicates growth. While still in growth territory, the service sector also slowed when compared to a month earlier with a reading of 52.

There’s already speculation about what a Trump presidency will mean for the UK.

The National Institute of Economic and Social Research said the protectionist measures planned by Trump could halve the UK’s economic growth in 2025 and 2026.

Yet, there may be some good news for investors. On the back of Trump’s victory, the pound weakened on 6 November. This led to the FTSE 100 jumping 1.3% as share prices lifted for multinational firms. For example, equipment rental company Ashtead, which would benefit from a strong US economy, saw a 6.6% boost.

Europe

While PMI readings suggest the eurozone economy is improving, it has recorded production falling for 19 consecutive months as of October 2024. The bloc’s two largest economies are playing a role in dragging down the figure as both France and Germany are affected by exports falling and weak demand.

Trump’s victory also had repercussions across Europe.

Shares in European renewable energy companies slid on 6 November as Trump has previously spoken about plans to boost US oil production. Danish wind turbine maker Vestas Wind Systems fell 8% and German solar energy producer SMA Solar Technology was down 10.4%.

Similarly, the threat of tariffs from the US hit German carmakers on 6 November. Porsche was the biggest faller on the German index DAX after it tumbled 7.4%, followed by BMW, Mercedes-Benz, and Volkswagen.

US

Just days before the US election, official figures showed that just 12,000 new jobs were added to the US economy in October. The figure is far below the 113,000 that economists expected and the 254,000 recorded in September. The low number may be due to businesses holding back decisions until election uncertainty passed, but it may have dealt a blow to the Democratic Party.

On 6 November, the day after the US election, the US dollar had its best day in four years as it climbed 1.5% against a basket of other countries.

In pre-trading on 6 November, shares in Trump Media & Technology were up almost 36%. Similarly, Elon Musk, who is a supporter of Trump, saw his business Tesla receive a 13% boost in premarket trading.

When the US stock market opened, it reached an all-time high. The S&P 500 index was up 1.9% and the Dow Jones benefited from a 3% bump as investors bet on Trump’s policies stimulating economic growth.

US company Disney also saw a boost on 14 November and share prices hit a six-month high. The value of the business increased by almost 10% thanks to the success of films Inside Out 2 and Deadpool & Wolverine. 

Inflation in the US continues to be above the 2% target. In the 12 months to October 2024, inflation was 2.6%, up from the 2.4% recorded in September.

Asia

China responded to the threat of Trump tariffs saying there would be no winners if a trade war began. Instead, ambassador Xie Feng said the US and China should focus on mutually beneficial cooperation to achieve many “great and good things”.

It was good news for China’s economy in October, with an official PMI showing factory activity returned to growth, ending five consecutive months of contraction. On 1 November, the news led to Hang Seng in Hong Kong adding 1% and the Shanghai Composite index rising by 0.4%.

Perhaps surprisingly, Japan’s Nikkei index gained as it waited for the outcome of the US general election on 5 November. The index rose 1.9% as a weaker yen boosted Japanese exporters’ overseas earnings.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

What the 2025 Stamp Duty changes mean for the property market

During the Autumn Budget, chancellor Rachel Reeves unveiled an increase to Stamp Duty that could affect buyers of second homes and property investors. The temporary higher thresholds for Stamp Duty are also set to end in 2025 and could lead to larger tax bills when buying property.

Read on to find out what you need to know about the tax.

Stamp Duty is a type of tax you pay when buying property or land

In England and Northern Ireland, Stamp Duty is a type of tax you may pay when buying property or land. The rate you pay varies depending on the value of the property or land, and whether it’ll be your main home.

Please note, Scotland and Wales have similar taxes to Stamp Duty known as “Land and Buildings Transaction Tax” and “Land Transaction Tax” respectively. The thresholds and reliefs for these taxes are different to Stamp Duty.

The Stamp Duty surcharge for second properties has increased by 2%

During the Budget, Reeves announced that changes to the rates of Stamp Duty when buying additional properties would rise from 31 October 2024.

The “Higher Rate for Additional Dwellings” previously meant that people buying a second property or investors paid a 3% Stamp Duty surcharge. This surcharge has now increased to 5%. As a result, those looking to expand their property portfolio could face a larger bill than expected.

In the Budget speech, Reeves said this change would “support over 130,000 additional transactions from people buying their first home, or moving home over the next five years”.

The Stamp Duty thresholds will fall on 1 April 2025

As well as the higher rates for second properties, the thresholds for paying Stamp Duty are set to rise and could affect home movers and first-time buyers.

Former prime minister Liz Truss temporarily slashed Stamp Duty thresholds in 2022 as part of the “mini-Budget”. This temporary measure will end on 1 April 2025.

This means that if you purchase property before the 31 March deadline, the thresholds and rates of Stamp Duty will be:

However, if the property transaction went through on or after 1 April 2025, the rates and thresholds will be:

Let’s say you’re buying a property worth £600,000 and it will be your only home. Under the current rules, you’d be liable for Stamp Duty of £17,500. If you delayed buying until after the change comes into force on 1 April 2025, you’d pay an extra £2,500 in Stamp Duty.

The first-time buyer’s relief will also change.

Up to 31 March 2025, first-time buyers can benefit from a discount if the property they are buying is worth less than £625,000. Eligible first-time buyers don’t need to pay Stamp Duty on the first £425,000 and would pay a lower rate of 5% on the portion of the property valued between £425,001 and £625,000.

From 1 April 2025, the threshold for paying Stamp Duty as a first-time buyer will fall to £300,000, and they will pay Stamp Duty at a rate of 5% on the portion between £300,001 and £500,000. If the price of the property exceeds £500,000, the relief cannot be used.

Stamp Duty changes could lead to a jump in property transactions

In a bid to avoid potentially higher Stamp Duty, it’s expected that those currently purchasing property will try to push transactions through before 1 April 2025. Some people who have been contemplating buying property in the new year might also be tempted to start the process sooner to complete the transaction before the changes come in.

Indeed, speaking to the BBC, Robert Gardner, chief economist at Nationwide, predicts a boost in activity followed by a six month slump. He noted that the effect of the changes is not likely to be as large as previous ones as high interest rates are still putting off some buyers.

Still, the changes could lead to a sizeable jump in property transactions during the first quarter of 2025.

Contact us to talk about your mortgage needs

As a mortgage adviser, we could offer you support when you’re searching for a mortgage deal if you plan to purchase property or land in 2025.

If you’re hoping to complete a property purchase before the Stamp Duty thresholds and reliefs change, ensuring the mortgage application process is as smooth as possible could be crucial. We’re here to offer you guidance and help you minimise delays.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

The Financial Conduct Authority does not regulate buy-to-let (pure) and commercial mortgages.

The pros and cons of choosing joint life insurance

If you and your partner are considering taking out life insurance, one question you may want to answer is: Would single or joint life insurance be better suited to us?

Life insurance is a type of financial protection that would pay out a lump sum if you passed away during the term. The payout would go to your beneficiary, who may use it how they wish, such as to pay off the mortgage, fund day-to-day costs, or allow them to take time off work.

While it can be challenging to think about, life insurance could provide your loved ones with financial security at a difficult time.

Yet, surveys suggest that many households are overlooking the value of life insurance.

According to a report in FT Adviser, almost 3 in 10 under-40s who have a mortgage haven’t taken out life insurance. It could potentially leave their partners struggling to pay the mortgage and other outgoings should the worst happen.

Similarly, Cover Magazine revealed that 72% of over-50s don’t have life insurance either. While some in this group will have paid off their mortgage, life insurance could still provide a valuable safety net for loved ones if you pass away.

If you have a partner, one consideration when reviewing life insurance is whether to take it out separately or jointly. There are pros and cons to both options and it’s important to consider what’s right for you.

The advantages of choosing joint life insurance

Joint life insurance is usually more cost-effective

To maintain the cover life insurance provides, you’ll need to make regular premium payments. When compared to two single life insurance premiums, the cost of joint life insurance is typically more cost-effective.

Joint life insurance could be useful when covering joint commitments

If you and your partner want the same level of cover to reflect joint commitments, joint life insurance could make sense.

Taking out a mortgage is often a trigger for reviewing life insurance, as you may want to ensure your partner could pay off the debt should you pass away. In this case, joint life insurance could be used to provide a way to do so should the worst happen.

Joint life insurance might be more convenient

When applying for joint life insurance, you’ll usually only need to complete one form between you and there will only be one premium payment to factor into your budget. For some, this could be more convenient and make joint life insurance attractive.

The drawbacks of opting for joint life insurance

Joint life insurance will usually only pay out once

Typically, joint life insurance will have no survivor benefits. This means it will only pay out once.

So, if your partner passed away, you’d receive a lump sum but you’d no longer be covered. This might be a concern if you have children or other dependents, as, if you later passed away, they would not receive a life insurance payout unless you took out further cover.

Premiums could be higher if one person is considered a risk

While joint life insurance is often more cost-effective, that’s not always the case. An insurer will consider the risk of you passing away when reviewing your application and may consider health and lifestyle factors.

If you or your partner has an existing medical condition or has lifestyle habits that shorten life expectancy, such as smoking, the premiums are likely to increase. In some cases, this could mean premiums end up being higher for the other party.

Joint life insurance might not be right for your relationship

Finally, you might want to consider relationships before deciding if joint life insurance is right for you.

For example, if you have a child from a previous relationship that you’d like some or all of a life insurance payout to go to, a joint option might not be appropriate for you.

Similarly, it’s important to consider what would happen if your relationship broke down. Providers may divide joint life insurance in these circumstances, but it isn’t always possible and it can be complex. In contrast, with single life insurance, you could simply change the name of your beneficiary if you need to and maintain the cover.

Contact us to discuss financial protection

As well as life insurance, other types of financial protection could offer you peace of mind and security when you need it most. To discuss which options could be appropriate for you, please contact us.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.

How to turn your child’s Christmas gifts into a nest egg

Christmas is a magical time of year, especially for young children who will be eager to see what Santa has left them under the tree. Along with their gifts, your child may receive money that could be put towards long-term goals and milestones.

It’s likely not just you who will be buying presents for your child this year. Indeed, according to a survey published in Your Money, in 2023, grandparents collectively spent £4.3 billion on younger family members – roughly £140 for each grandchild.

With your child being lucky enough to have so many treats, you might want to think longer-term when deciding how to use the money your child receives during the festive period. Rather than buying more toys, it could be used to create a nest egg that may offer them a vital head start when they reach adulthood. While it might not seem as fun as the latest gadget now, your children are likely to thank you in the future.

So, here are three ways you could use your child’s Christmas money to build a nest egg.

1.  Place money in a savings account

One of the simplest steps you can take to start building a nest egg is to place financial gifts into a savings account.

The money is usually accessible, so you could use it for short-term savings goals. It could also be a valuable way to teach your child about the benefits of saving and how interest works.

While interest rates have increased over the last two years, when you’re saving for a long-term goal, inflation could still erode the value of your child’s money in real terms. As the cost of living rises, if the savings don’t grow at a faster pace, the value is falling in real terms. So, you may want to consider how and when you’d like the nest egg to be used.

If you’re saving for your child, a Junior ISA (JISA) may be an option you want to weigh up.

JISAs offer the same tax benefits as their adult counterparts – interest earned on savings isn’t liable for tax. In addition, the interest rates offered may be higher than a standard savings account.

In the 2024/25 tax year, you can add up to £9,000 to JISAs on behalf of your child. However, keep in mind that the money held in a JISA isn’t accessible until the child turns 18.

2. Invest the money to support your child’s long-term goals

If you plan to build a nest egg for long-term goals, investing might be the right option for you.

Investing on behalf of your child presents an opportunity for the money to grow at a faster pace than it would in a savings account. However, returns cannot be guaranteed and investments may experience volatility. As a result, it’s often a good idea to invest with a minimum time frame of five years.

You should also consider what level of risk is appropriate for your goals when investing. This is an area we could help you with.

Again, a JISA may be an option to consider if you want to invest your child’s money. Indeed, official statistics show almost 6 in 10 JISAs are investment accounts.

A Stocks and Shares JISA provides a way to invest tax-efficiently – investments held in a JISA are not liable for Capital Gains Tax.

3. Use the money to start a pension

It might seem strange, but starting a pension on behalf of your child before they even think about entering the workforce could be valuable.

As the money held in a pension is typically invested for decades, it has an opportunity to grow throughout their life.

Longer lives and other financial pressures mean younger generations could find it more difficult to retire comfortably. Indeed, according to a Canada Life survey, more than two-thirds of people believe retiring in your 60s will become a thing of the past.

So, while retirement might be a milestone that’s more than 50 years away for your child, contributing to their pension now could offer them more financial freedom later in life.

There isn’t a minimum age for opening a pension. Only a parent or guardian can open a pension for a child, but once it’s set up, other third parties, such as grandparents, may make contributions.

Much like an adult pension, the contributions may even benefit from tax relief which provides a further boost to the nest egg. Non-taxpayers, including children, can usually pay up to £2,880 into a pension in 2024/25 while retaining tax relief.

The key benefit to adding Christmas money to a pension is the chance it has to grow – a relatively small contribution now could grow significantly when you consider how investment returns may compound. Of course, investment returns cannot be guaranteed.

If you’re considering this option, keep in mind that your child would not be able to access the money until they reach pension age, which is 55 and rising to 57 in 2027, and could rise further in the future.

As a result, contributing to a pension for your child may be an option you want to consider after you’ve taken other steps, such as maximising their JISA allowance.

If you’d like to talk about how to set up a pension for your child or balancing investment risk, please get in touch.

Contact us to discuss how you could provide your child with financial security

If you want to provide your child with financial security and more options when they reach adulthood, there may be other steps you can take too. For example, you might want to set up regular contributions to their JISA or put money aside to support them through university.

We could help make your family’s future ambitions part of your financial plan. Please get in touch to talk about your goals and how you might reach them.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. 

Financial fears could be holding back millions of retirement dreams

Research suggests the fear of running out of money later in life could be holding back millions of retirees. While spending too much too soon is a risk for some retirees, it could also mean you miss out on the lifestyle or experiences you’ve been looking forward to.

According to a report in MoneyAge, 30% of retirees – the equivalent of 6.4 million people – said spending money makes them anxious. A similar proportion agreed they often don’t spend money on things they need because they’re worried about the future.

Interestingly, a quarter of those questioned said their emotions influence their financial decisions.

In some cases, retirees might need to be mindful of their budget to ensure their assets last their lifetime. Yet, the responses suggest that many retirees are reducing spending based on emotions, rather than a financial review.

Spending too much too soon is a risk many retirees may want to consider

Running out of money later in life may be a concern if you choose to access your pension flexibly or are using other assets to complement a reliable income.

When you use flexi-access drawdown to access your pension, you can adjust the income you receive to suit your needs. This provides you with greater flexibility, which could be useful if your income needs change or you have a one-off expense.

However, you’ll also need to consider how much you can sustainably withdraw from your pension each year. If you take a higher amount in your early years of retirement, it could leave you with a shortfall in the future. In some cases, that could lead to an inability to meet financial commitments or mean that you need to adjust your lifestyle.

So, the concerns raised in the survey are valid ones. Yet, being overly cautious could present a different type of risk too.

You could risk the retirement lifestyle you’ve worked hard to secure, even if you have the assets to achieve it because fear means you’re holding back.

A retirement plan could help you manage financial fears

A bespoke retirement plan could help ease your financial fears when you retire.

As part of creating a retirement plan with your financial planner, you might use a tool known as “cashflow modelling”. This could help you visualise how your wealth and assets might change during your lifetime.

A cashflow model uses information about your current finances and your plans to project how your wealth will change. So, you might want to model whether withdrawing £35,000 a year from your pension could mean you run out of money later in life. Or calculate what would happen if you wanted to withdraw a lump sum to fund a one-off cost, like going on a luxury cruise.

Not only does cashflow modelling help you understand how your retirement plan could affect your finances, but it may also be used to understand the effect of events outside of your control. For example, you might want to understand how your pension would fare if you needed to replace your home’s roof unexpectedly, or how a period of high inflation may affect your long-term finances.

As you can model these scenarios that might be a cause of financial fear, you could find your worries are eased when you realise you’re in a better position than you initially thought. Alternatively, it may highlight a potential gap that you might be able to close as a result.

It’s important to note that the projections from a cashflow model cannot be guaranteed. The data will be dependent on the information provided and will make some assumptions, such as the rate of inflation or expected investment returns.

Yet, cashflow modelling could still be a useful way to understand how the decisions you make might affect your financial security in the future.

One of the challenges of managing your finances in retirement is that it often requires a mindset shift.

During your working life, you might have focused on accumulating wealth. This may have involved contributing to your pension, creating an emergency fund, or investing with the aim of delivering long-term growth. During this period, you might have formed positive money habits that helped you reach your goals.

When you retire, many people switch to decumulating wealth as they use assets to fund their lifestyle. It can be more difficult than you expect to change the habits you’ve formed to suit the next chapter of your life.

So, it’s not just fear you may have to consider when understanding what might be influencing your financial decisions in retirement.

Again, a retirement plan could give you the confidence to start using the assets you’ve accumulated during your life to support the retirement goals you’ve been working towards.

Get in touch to understand your retirement income

If you’d like to understand how to use your pension to create a sustainable income in retirement or how you might use other assets, please get in touch with us. We could work with you to create a tailored retirement plan that considers both your financial situation and your goals.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. 

3 simple questions that may help you update your life goals for 2025

As 2025 draws nearer, now is the perfect time to think about your aspirations for the year ahead and beyond. Read on to discover some simple questions that may help you assess if your life goals have changed.

Last month, you read about 10 financial tasks to complete to get your finances on track for the new year. With the foundations set, you can start to think about what you want to achieve.

Setting goals is a crucial part of financial planning. After all, if you don’t have a direction, how do you know if you’re on track? Without a clearly defined goal, you could miss out on opportunities simply because you haven’t considered or prepared for them.

Even if you’ve already set goals, reviewing them can be a useful exercise.

Your goals can change during your lifetime. Perhaps you’d previously planned to retire at 65, but you’re enjoying your position less now. You might decide you want to move into a less demanding role, try something different, or transition into retirement sooner. Reflecting these wishes in your updated goals could help you adjust your financial plan to accommodate them.

So, here are three simple questions that could help you identify if your life goals should be updated in 2025.

1.  Are your existing goals still right for you?

A useful first step is to review the goals you’ve previously made – do they still reflect what you want to get out of life?

You might find that these goals still align with what you want to achieve, or only a small adjustment is needed to make them right for you.

Other times, you might find that your outlook has completely changed. Perhaps welcoming your first child has shifted your priorities, or an experience you enjoyed recently means you want to make a lifestyle change.

Negative events might affect your goals too, such as a relationship breaking down or work becoming more stressful.

2.  What makes you happy?

Spend some time pondering what makes you happy and helps you feel fulfilled in your life now.

You might say that spending time with your family or friends is what puts a smile on your face. Or volunteering in your local community gives you a sense of purpose and pride.

While financial planning considers the long-term, the present is just as important. Saving all your money for the future, but not enjoying life now could leave you feeling demotivated and missing out on experiences that are important to you.

Defining what makes you happy could help you create a financial plan that balances these experiences with long-term goals.

For example, if you want to spend more time with your children or grandchildren, could you reduce your working hours without compromising your retirement? A financial plan could help you assess if that’s possible.

3.  What are you looking forward to in the future?

Finally, it’s time to consider your long-term goals – when you think about the future, what gets you excited?

It’s never too soon to think about your long-term goals, even if they’re decades away. Some goals might require you to work towards them for years or are easier to manage if you start thinking about them sooner.

Your retirement is a good example of this. When you first start working, retirement might be 40 years or more away. Yet, if you want to enjoy a comfortable lifestyle once you step away from work, it could be beneficial to think about right away. Contributing to a pension at the start of your career could mean you need to add far less to reach your goals thanks to the power of compounding returns.

So, setting out long-term goals now could help your money go further and mean you’re far more likely to turn them into a reality.

Don’t forget to review your financial plan after setting goals

A financial review alongside updating your goals may be important, especially if you’ve updated them.

Carrying out a review could help you assess if your new goals are realistic with the steps you’re currently taking or if you need to make adjustments. For instance, you might plan to retire a few years earlier and visit exotic locations – do you need to increase your pension contributions to do this? Or could you use other assets to fund your trip of a lifetime?

Speak to us about your goals

As your financial planner, understanding your goals is important to us. Knowing what’s important to you means we’re in a better position to work with you to create a financial plan that will help you build the life you want. So, if your aspirations for 2025 or further ahead have changed, please get in touch to arrange a meeting.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.