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Author: Sophie Soraf

Planning ahead: learn about types of pensions

Posted on by Sophie Soraf
Your guide to retirement planning

Pensions can be complicated because there are different types of pensions, and different rules that govern them, plus also lots of options for what you can do with a pension when you want to use the money. It’s worth understanding the main concepts so that you can make choices that could have a significant impact on the quality of your retirement. Before making any decisions about pensions, you should always consult an independent financial adviser.

What are the different types of pensions?

There are three major pension options and most people fund their retirement through a combination of one, two or all three of these types.

Private pensions

Also known as ‘defined contribution’ or ‘money purchase’ pensions, you pay part of your earnings into a pension fund, which your provider invests. The final amount depends on your contributions, fund performance, fees, and how you withdraw the money.

State pension

A weekly payment (£203.85) paid from age 66, gradually increasing to 67 and 68 depending on your birth date. To qualify, you need at least 10 years of National Insurance contributions (NICs), with 35 years required for the full amount.

Workplace pensions

Provided by your employer, a portion of your salary is automatically deducted and topped up by employer contributions and government tax relief, unless you opt out.

How to make your workplace pension better for the future?

You could do the following:

  • Review your fund choices: Adjust your investments based on your risk tolerance. Many providers offer tools to help assess your risk profile.
  • Consolidate pensions: Transfer existing pensions into your workplace pension to simplify management and boost its value. You can often do this directly or with financial advice.
  • Increase contributions: Consider raising your contribution percentage with your employer or HR. Basic rate taxpayers get 20% tax relief, while higher-rate taxpayers get 40%. Salary sacrifice is also an option.

For help, contact your pension provider or a financial adviser. You typically receive tax relief on all contributions up to annual and lifetime limits.

Is there a limit on how much I can pay into a pension?

You can contribute as much as you like to your pension, but the amount of tax relief you can claim is limited. For the 2023-24 tax year, the Annual Allowance is £60,000 or 100% of your earnings, whichever is lower. If you’ve used up your current Annual Allowance, you may be able to carry forward unused allowances from the previous three years, provided you were a member of a pension scheme during that time.

For higher earners with a taxable income over £200,000, the Tapered Annual Allowance reduces the amount of tax-relievable contributions. If you’ve flexibly accessed your pension, the Money Purchase Annual Allowance (MPAA) applies, limiting contributions to £10,000 per year from April 2023.

When can I access my pension?

Pension freedoms introduced in 2015 allow you greater flexibility in how you can access certain pension pots from age 55; this will increase to 57 from 6th April 2028.  This greater flexibility gives more options but is only available on certain types of pensions and you should seek advice to assess what your specific options are.

How we can help 

Our advisers simplify your options and tailor a plan based on your financial goals, risk tolerance, and tax position.

So, if you would like to discuss your pension options and retirement planning, do get in touch. We are only a phone call away. You can be sure that all our advice and recommendations will be focused on getting you the best possible result.

This material is intended to be for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Past performance is not a reliable indicator of future returns and all investments involve risks. Some information quoted was obtained from external sources we consider to be reliable.

Tees is a trading name of Tees Financial Limited which is authorised and regulated by the Financial Conduct Authority. Registered number 211314. Tees Financial Limited is registered in England and Wales. Registered number 4342506.

 

Interest rate adjustments and mortgage market shifts

Posted on by Sophie Soraf
The Bank of England’s recent suggestion of a potential “soft landing” for the UK economy has provided a bit of hope amongst the ongoing economic challenges. While this news has been welcomed by many, the lingering effects of high-interest rates continue to impact various sectors, particularly the housing market.

In response to the changing economic landscape, mortgage lenders have begun to adjust their rates. Several lenders have recently announced reductions in their mortgage rates, sparking renewed interest among prospective homebuyers. This downward trend in rates has led to increased affordability for some, making it more accessible for individuals and families to enter the property market.

Navigating uncertainty

Despite the recent positive developments, there remains a degree of uncertainty surrounding the sustainability of this. Several factors continue to show challenges to the broader economy, including:

  • Inflationary pressures: While inflation rates have shown signs of easing, they remain elevated, impacting consumer spending and business confidence.
  • Geopolitical tensions: Global conflicts and economic uncertainties can influence investor attitudes and market stability.
  • Interest rates: The Bank of England’s monetary policy decisions will continue to shape the interest rate environment, affecting borrowing costs for both consumers and businesses.

Your trusted financial partner

Given the dynamic nature of the current economic climate, it’s key for individuals and families to seek expert financial advice. Our Wealth Team can provide valuable guidance and support in navigating these uncertain times.

We can assess how changes in interest rates may affect your financial situation, particularly if you have existing loans or mortgages. If needed, we can help you explore mortgage options while developing a personalised long-term financial plan, ensuring your wealth is protected through effective financial planning and risk management strategies.

Introducing Toni

With over 30 years of experience in the financial services industry, Toni specialises in providing expert advice to clients seeking guidance on later life financial matters. Her expertise extends to life, health, mortgage, and pension planning, with a particular focus on later life lending, equity release, and care fees planning.

Toni works closely with her colleagues at Tees Wealth and our legal teams to deliver comprehensive care fees planning and equity release advice. This involves liaising with local authorities and government departments on behalf of our clients to ensure they receive the best possible support.

Delivering what you really need

At Tees, we believe that financial and legal advice should empower you to make informed decisions. Our goal is to provide you with the information and options you need to confidently navigate your retirement years. Toni’s expertise and personalised approach will help you understand the complexities of later life planning and make informed choices.

Care funding: A personalised approach

We understand that planning for care funding can be a complex and emotional process. Our team is committed to making this process as straightforward as possible. We work closely with our clients to understand their specific needs and tailor our advice accordingly. Through careful planning, it may be possible to structure your finances in a way that allows you to pay for care fees without depleting all of your assets.

Equity release: Achieving your financial goals

Whether you’re looking to downsize, gift your property, or simply enhance your retirement lifestyle, equity release may be a suitable option. Toni can provide expert advice on the costs, risks, and potential implications of equity release on inheritance tax, care entitlements, and means-tested benefits.

Why choose equity release?

  • access tax-free cash from your home
  • maintain ownership and stay in your property
  • enhance your retirement lifestyle
  • repay outstanding mortgage or debt
  • provide financial support or care for loved ones
  • purchase a new home
  • gift to children or grandchildren
  • home and Garden improvements

This material is intended to be for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Past performance is not a reliable indicator of future returns and all investments involve risks. Some information quoted was obtained from external sources we consider to be reliable.

Tees is a trading name of Tees Financial Limited which is authorised and regulated by the Financial Conduct Authority. Registered number 211314. Tees Financial Limited is registered in England and Wales. Registered number 4342506.

Unexpected economic boost: UK growth outpaces forecasts

Posted on by Sophie Soraf
Economic Review July 2024

Figures released last month by the Office for National Statistics (ONS) showed the UK economy grew faster in May than had been predicted, while survey evidence points to a more recent post-election pick-up in business activity.

The latest gross domestic product (GDP) statistics revealed that economic output rose by 0.4% in May, twice the level forecast in a Reuters poll of economists. May’s figure also represented a strong rebound from the zero-growth rate recorded in April, with a broad-based increase in output as the services, manufacturing, and construction sectors all posted positive rates of growth.

ONS also noted that growth was relatively strong in the three months to May, with GDP rising by 0.9% in comparison to the previous three-month period. This represents the UK economy’s fastest growth rate for more than two years.

Evidence from a closely watched economic survey also suggests private sector output picked up last month following a lull in the run-up to July’s General Election. The preliminary headline growth indicator from the latest S&P Global/CIPS UK Purchasing Managers’ Index (PMI) stood at 52.7 in July, slightly ahead of analysts’ expectations and up from a six-month low of 52.3 in June. Manufacturing output was particularly strong, with this sector expanding at its fastest rate in almost two and a half years.

Commenting on the findings, S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “The flash PMI survey data for July signal an encouraging start to the second half of the year, with output, order books and employment all growing at faster rates amid rebounding business confidence. The first post-election business survey paints a welcoming picture for the new government, with companies operating across manufacturing and services having gained optimism about the future and reporting a renewed surge in demand.”

Fresh signs of cooling jobs market

Last month’s release of labour market statistics revealed further signs of a softening in the UK jobs market with pay growth easing and another drop in the overall number of vacancies.

Recently released ONS figures showed that average weekly earnings, excluding bonuses, rose at an annual rate of 5.7% in the three months to May. Although this was in line with analysts’ expectations, it did represent a modest decline from the 6.0% recorded during the previous three-month period and was the slowest reported rate of pay growth since the summer of 2022.

ONS said the latest release suggested pay growth is now showing ‘signs of slowing again’ although it also pointed out that, in real terms, wage growth still stands at a two-and-a-half-year high. Indeed, after adjusting for inflation using the Consumer Prices Index including owner occupiers’ housing costs, regular pay rose by 2.5% in the three months to May.

The data also revealed a further fall in the number of job vacancies, with 30,000 fewer reported in the April–June period compared to the previous three months. While at 889,000, the total is still significantly higher than pre-pandemic levels, this latest fall was the 24th successive monthly decline in the overall level of vacancies.

ONS highlighted other signs of ‘cooling’ in the labour market as well, with growth in the number of employees on the payroll said to be ‘weakening over the medium term.’ Additionally, while the latest release did show the unemployment rate unchanged at 4.4%, ONS noted that the rate has been ‘gradually increasing.’

The statistics agency also provided an update on its plans to improve reliability of the labour market data. A switch to a new version of its Labour Force Survey, which had been due to take place in September, has now been delayed until next year.

Markets (Data compiled by TOMD)

On the last day of July, US equities were supported as investors contemplated the latest move from the Federal Reserve to retain rates, with indicators from Fed Chair Jerome Powell that a September cut “could be on the table.”

The tech-oriented NASDAQ responded positively after a challenging few days as initial earnings from some tech mega caps disappointed. The NASDAQ closed July down 0.75% on 17,599.40, while the Dow Jones closed the month up 4.41% on 40,842.79.

The UK’s blue-chip FTSE 100 had a boost on 31 July, with a series of strong headline earnings supporting, while traders await the Bank of England’s next interest rate decision. The index closed the month on 8,367.98, a gain of 2.50% during July, while the FTSE 250 closed the month 6.48% higher on 21,600.71. The FTSE AIM closed on 787.02, a gain of 2.96% in the month. The Euro Stoxx 50 closed July on 4,872.94, down 0.43%. The Japanese Nikkei 225 closed the month on 39,101.82, a monthly loss of 1.22%.

On the foreign exchanges, the euro closed the month at €1.18 against sterling. The US dollar closed at $1.28 against sterling and at $1.08 against the euro.

Brent crude closed July trading at $80.91 a barrel, a loss over the month of 4.56%. With Middle East conflicts escalating, crude prices were impacted as markets closely watch geopolitical developments. Gold closed the month trading at $2,426.30 a troy ounce, a monthly gain of 4.09%.

Index

Value (31/07/24)

Movement since 28/06/24
FTSE 100 8,367.98 +2.50%
FTSE 250 21,600.71 +6.48%
FTSE AIM 787.02 +2.96%
Euro Stoxx 50 4,872.94 -0.43%
NASDAQ Composite 17,599.40 -0.75%
Dow Jones 40,842.79 +4.41%
Nikkei 225 39,101.82 -1.22%

Headline inflation rate holds steady

Consumer price statistics published last month by ONS showed that the UK headline rate of inflation was unchanged in June defying analysts’ expectations of a slight fall.

According to the latest inflation figures, the Consumer Prices Index (CPI) 12-month rate – which compares prices in the current month with the same period a year earlier – remained at 2.0% in June. This was marginally above the 1.9% consensus forecast taken from a Reuters poll of economists.

The largest downward pressure on June’s CPI rate came from the clothing and footwear sector, which ONS said was due to a higher level of discounting in this year’s summer sales compared to 2023. Hotel prices, however, rose by a significantly greater extent this June than last year, while a comparatively smaller fall in the costs of second-hand cars also put upward pressure on the headline rate.

Just prior to release of June’s data, the International Monetary Fund (IMF) warned that the UK was among a number of countries witnessing some ‘persistence’ in inflation, particularly in relation to services inflation. The IMF added that this was ‘complicating monetary policy normalisation’ with the ‘upside risks to inflation’ raising the prospects of interest rates staying ‘higher for even longer.’

Cooler weather hits retail sector

The latest official retail sales statistics revealed declining sales volumes after unseasonably cool weather deterred shoppers. At the same time, more recent survey data suggests the retail environment remains challenging.

ONS figures released last month showed that total retail sales volumes fell by 1.2% in June, following strong growth during May. ONS said June saw a decline across most sectors, particularly those sensitive to weather changes such as department stores and clothes shops. Retailers blamed poor weather and low footfall, as well as election uncertainty, for dampening sales.

Evidence from the latest CBI Distributive Trades Survey shows trading conditions have remained difficult, with its headline measure of sales volumes in the year to July dropping to -43% from -24% the previous month. The CBI described July as a ‘disappointing’ month for retailers, blaming a combination of ‘unfavourable weather conditions’ and ‘ongoing market uncertainty.’

The survey also found that the retail sector expects the weak outlook to continue this month, although August’s fall in sales volumes is forecast to be slower (-32%). The CBI also noted some glimmers of optimism, with several retailers expressing hopes for ‘an improvement in market conditions post-general election.’

All details are correct at the time of writing (1 August 2024)

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice, and the accuracy and completeness of the information cannot be guaranteed. It does not provide individually tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of relief from taxation are currently applied or proposed and are subject to change; their value depends on the investor’s individual circumstances. No part of this document may be reproduced without prior permission.

This material is intended for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Tees is a trading name of Tees Financial Limited, which is regulated and authorised by the Financial Conduct Authority. Registered number 211314.

Tees Financial Limited is registered in England and Wales. Registered number 4342506.

Bank of England hints at imminent rate cuts amid economic shifts

Posted on by Sophie Soraf
Economic Review June 2024 – the prospect of a rate cut moves closer

While last month once again saw the Bank of England (BoE) leave interest rates unchanged at a 16-year high, the minutes of the Bank’s Monetary Policy Committee (MPC) meeting signalled a notable change in tone. Economists now view a rate cut as the most likely outcome when the MPC next convenes.

At its latest meeting, which concluded on 19 June, the MPC voted by a 7–2 majority to maintain the Bank Rate at 5.25%. For the second month running, the two dissenting voices called for an immediate quarter-point reduction, while, for the first time, some other members described their thinking as being “finely balanced.”

The meeting minutes also highlighted this potentially significant shift in stance, noting that the MPC will now examine whether ‘the risks from inflation persistence are receding.’ The minutes concluded, ‘On that basis, the Committee will keep under review for how long Bank Rate should be maintained at its current level.’

Last month’s inflation statistics published by the Office for National Statistics (ONS) before the MPC announcement revealed that the headline rate has returned to its 2% target level for the first time in almost three years. In a statement released alongside the MPC decision, BoE Governor Andrew Bailey described that as “good news.” He also said that policymakers need to be sure inflation will remain low and added, “that’s why we’ve decided to hold rates for now.”

July’s release of economic data, particularly in relation to wage growth and services inflation, is likely to prove pivotal to the next MPC decision, which is due to be announced on 1 August. A recent Reuters survey, however, found that most economists now expect an imminent cut, with all but two of the 65 polled predicting an August rate reduction.

Survey data signals a slowing pace of growth

Official data published last month revealed that the UK economy failed to grow in April, while survey evidence points to a more recent slowdown in private sector output due to rising uncertainty in the run-up to the General Election.

The latest monthly economic growth statistics released by ONS showed the UK economy flatlined in April, as most economists had predicted. Some sectors did report growth; services output, for instance, was up by 0.2%, a fourth consecutive monthly rise, with both the information and technology and the professional and scientific industries reporting rapid expansion across the month.

Other sectors, however, contracted, with ONS saying some were hit by April’s particularly wet weather. A number of retail businesses, for example, told the statistics agency that above-average rainfall had dented their trade during the month. Activity across the construction industries was also believed to have been impacted by the wetter weather.

More recent survey data also suggests private sector output is now growing at its slowest rate since the economy was in recession last year. Preliminary data from the S&P Global/CIPS UK Purchasing Managers’ Index (PMI) revealed that its headline economic growth indicator fell to 51.7 in June from 53.0 in May, a larger decline than analysts had been expecting. While the latest figure does remain above the 50 threshold, denoting growth in private sector output, it was the indicator’s lowest reading since November 2023.

Regarding the data, S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “Flash PMI survey data for June signalled a slowing in the pace of economic growth. The slowdown, in part, reflects uncertainty around the business environment in the lead-up to the General Election, with many firms seeing a hiatus in decision-making pending clarity on various policies.”

Markets (Data compiled by TOMD)

As June drew close, global indices were mixed as a raft of economic data was released. Stronger-than-expected GDP data in the UK at month end fuelled speculation over the timing of interest rate cuts, while in the US, the latest inflation reading boosted market sentiment, and unemployment data came in below estimates.

Although the FTSE 100 registered its first monthly decline in four months, the upward revision to Q1 GDP on 28 June supported sentiment around UK-focused equities at month’s end. The main UK index closed June at 8,164.12, a loss of 1.34% during the month, while the FTSE 250 closed the month 2.14% lower at 20,286.03. The FTSE AIM closed at 764.38, a loss of 5.14% in the month. The Euro Stoxx 50 closed June on 4,894.02, down 1.80%. In Japan, the Nikkei 225 closed the month at 39,583.08, a monthly gain of 2.85%. Meanwhile, in the US, the Dow closed the month up 1.12% at 39,118.86, and the NASDAQ closed June up 5.96% at 17,732.60.

On the foreign exchanges, the euro closed the month at €1.17 against sterling. The US dollar closed at $1.26 against sterling and at $1.07 against the euro.

Gold closed June trading at around $2,330.90 a troy ounce, a monthly loss of 0.74%. Brent crude closed the month trading at $84.78 a barrel, a gain of 4.18%. The price rose during the month as indicators suggested an expanded military conflict in the Middle East, which could further disrupt the production of OPEC+ member Iran.

Index

Value (28/06/2024)

Movement since 31/05/024
FTSE 100 8,164.12 -1.34%
FTSE 250 20,286.03 -2.14%
FTSE AIM 764.38 -5.14%
Euro Stoxx 50 4,894.02 -1.80%
NASDAQ Composite 17,732.60 +5.96%
Dow Jones 39,118.86 +1.12%
Nikkei 39,583.08 +2.85%

Retail sales rebound strongly in May

The latest official retail sales statistics revealed strong growth in sales volumes during May after heavy rain dampened activity in the previous month, although more recent survey data does suggest the retail environment remains challenging.

ONS data published last month showed that total retail sales volumes rose by 2.9% in May, a strong bounce back from April’s 1.8% decline. ONS said sales volumes increased across most sectors, with clothing retailers and furniture stores enjoying a particularly strong rebound from the previous month’s weather-impacted figures.

Evidence from the latest CBI Distributive Trades Survey, however, suggests May’s recovery has proved to be short-lived. Its headline measure of sales volumes in the year to June fell to -24% from +8% the previous month. While the CBI did note that unseasonably cold weather may have impacted June’s figures, the data certainly suggests that retailers still face a tough trading environment.

CBI Interim Deputy Chief Economist Alpesh Paleja said, “Consumer fundamentals are improving, with inflation now at the Bank of England’s 2% target and real incomes rising. But it’s clear that households are still struggling with the legacies of the cost-of-living crisis, with the level of prices still historically high in some areas.”

Financial challenges await the new government

Data released by ONS last month showed that UK public sector debt is now at its highest level for over 60 years, while the Institute for Fiscal Studies (IFS) has warned that the next government will face a fiscal ‘trilemma.’

The latest public sector finance statistics revealed that government borrowing totalled £15bn in May, the third highest amount ever recorded for that month. Although the figure was £800m higher than May last year, it did come in below analysts’ expectations and was £600m less than the Office for Budget Responsibility had predicted in its latest forecast.

Despite this, the data also showed that public sector net debt as a percentage of economic output has now risen to 99.8%. This was up 3.7 percentage points from last May’s figure, leaving this measure of debt at its highest level since 1961.

Analysis by the IFS has also highlighted the scale of the financial challenge awaiting whichever party wins the forthcoming General Election. The IFS said that, unless economic growth is stronger than expected, the incoming government will face a ‘trilemma,’ either having to raise taxes more than their manifestos imply, implement cuts to some areas of public spending or allow the national debt to continue rising.

All details are correct at the time of writing (1 July 2024)

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice, and the accuracy and completeness of the information cannot be guaranteed. It does not provide individually tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of and reliefs from taxation are currently applied or proposed and are subject to change; their value depends on the investor’s individual circumstances. No part of this document may be reproduced without prior permission.

This material is intended for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Tees is a trading name of Tees Financial Limited, regulated and authorised by the Financial Conduct Authority and registered number 211314.

Tees Financial Limited is registered in England and Wales and registered number 4342506.

Election Debrief: 5 July 2024

Posted on by Sophie Soraf
Following weeks of intense campaigning, the electorate has delivered its verdict. As widely expected, the Labour Party has secured a historic landslide victory, soaring past the magic 326 seat mark in the early hours of Friday morning.

With the party now occupying over 400 seats, Sir Keir Starmer’s promise of “change” has certainly struck a chord with the electorate. In his victory speech, the incoming Prime Minister said, “We did it! You campaigned for it. You fought for it. You voted for it, and now it has arrived. Change begins now.”

The Conservatives sustained huge losses in the party’s worst-ever election performance. Outgoing Prime Minister Rishi Sunak said, “The British people have delivered a sobering verdict tonight, there is much to learn… and I take responsibility for the loss.” He continued, “Today, power will change hands peacefully and orderly, with goodwill on all sides. That is something that should give us all confidence in our country’s stability and future.”

Mr Sunak, who has been in office since October 2022, managed to hold on to his seat in Richmond and Northallerton in Yorkshire; meanwhile, a raft of senior Conservative MPs, including former Prime Minister Liz Truss, Defence Secretary Grant Shapps, Penny Mordaunt, and Jacob Rees-Mogg, lost their seats. In Wales, the Conservative Party lost all of its seats.

It was a record-breaking night for the Liberal Democrats, who secured over 70 seats. In early Friday morning, Sir Ed Davey said his party was set to achieve its “best result for a century.” Meanwhile, Reform UK leader Nigel Farage was voted an MP for the first time, and the Green Party broke records.

The Scottish National Party (SNP) suffered a dismal night, with SNP leader John Swinney describing the General Election result as “very, very difficult and damaging” for the party. The result greatly diminishes the chances of an independence referendum.

In the first July General Election since 1945, millions of voters went to polling stations on Thursday to have their say. However, early indications suggest an estimated voter turnout below 60% – the lowest in over 20 years.

Market reaction

In the run-up to the election, the markets were reasonably stable, with a strong Labour victory already priced in and investors hopeful of a pro-growth productivity-led agenda. As the markets opened following the results on 5 July, the FTSE 100 and FTSE 250 both opened up, and sterling held steady after the exit polls came in on Thursday evening.

What now?

A new parliament will be summoned to meet on 9 July. The King’s Speech is scheduled for 17 July and is part of the State Opening of Parliament, before which no substantive parliamentary business can usually occur. The new government will then decide a date on which the summer recess will commence.

And a Budget?

We await the date of incoming Chancellor Rachel Reeves’ first Budget, where we will gain clarity on the new government’s fiscal priorities, where any changes to tax and spending will be announced. Ms Reeves said Labour would not hold a Budget without an independent forecast by the Office for Budget Responsibility (OBR), and this requires ten weeks’ notice to prepare.

Labour manifesto key pledges

Some of the new government’s key manifesto pledges include reforming planning rules, recruiting 6,500 new teachers and tackling immigration. Plans are expected to be funded by raising £8bn through abolishing the non-dom tax status, increasing Stamp Duty for foreign buyers, clamping down on those underpaying tax by closing ‘loopholes’ in the windfall tax on oil and gas firms, and introducing VAT on private school fees (Rachel Reeves has suggested this won’t be imposed until at least 2025). No changes were promised to personal tax rates and pensions. The Triple Lock is expected to be upheld, and the pensions landscape will be reviewed.

The bottom line

Whichever way you voted on 4 July, the country has acted decisively to provide a massive majority, and under Keir Starmer’s leadership, the hard work begins. As usual, we will closely monitor developments likely to impact your finances over the coming months. Looking after your financial future remains a priority. Please get in touch if you have any questions.

The value of investments can go down and up, and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

All details are correct at the time of writing (5 July 2024)

This material is intended for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Tees is a trading name of Tees Financial Limited, regulated and authorised by the Financial Conduct Authority and registered number 211314.

Tees Financial Limited is registered in England and Wales and registered number 4342506.

Economic Review May 2024

Posted on by Sophie Soraf
UK growth rate at a two-year high

Last month’s release of first-quarter gross domestic product (GDP) statistics confirmed that the UK economy has exited the shallow recession it entered during the latter half of last year. Survey evidence suggests private sector output has expanded over the past two months.

The latest GDP data published by the Office for National Statistics (ONS) showed the UK economy grew by 0.6% from January to March. This figure was above all forecasts submitted to a Reuters poll of economists, with the consensus prediction pointing to a 0.4% first-quarter expansion. It represents the fastest quarterly growth rate since the final three months of 2021.

ONS said that growth was driven by broad-based strength across the services sector, with retail, public transport and haulage, and health all performing well; car manufacturers also enjoyed a particularly good quarter, although construction activity remained weak. In addition, the statistics agency noted that the first-quarter data was likely to have been boosted by Easter falling in March this year compared to April last year.

Data from the closely-watched S&P Global/CIPS UK Purchasing Managers’ Index (PMI) suggests the recovery continued in the second quarter. While May’s monthly release did reveal that the preliminary composite headline Index fell to 52.8 from 54.1 in April, this latest reading was still above the 50 threshold that denotes growth in private sector activity.

Commenting on the findings, S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “The flash PMI survey data for May signalled a further expansion of UK business activity, suggesting the economy continues to recover from the mild recession seen late last year. The survey data are consistent with GDP rising by around 0.3% in the second quarter, with an encouraging revival of manufacturing accompanied by sustained, but slower, service sector growth.” 

Inflation data dampens early rate cut hopes

Chances of the Bank of England (BoE) sanctioning a June interest rate cut have declined significantly following last month’s smaller-than-expected drop in the rate of inflation.

Following its latest meeting, which concluded on 8 May, the BoE’s Monetary Policy Committee (MPC) voted by a seven-to-two majority to leave the Bank Rate unchanged at 5.25%. The two dissenting voices, however, both preferred a quarter-point reduction, and comments made by policymakers after the meeting did appear to suggest a first rate cut since 2020 was edging ever closer.

Speaking just after announcing the MPC’s decision, BoE Governor Andrew Bailey made it clear that the Bank needs to see “more evidence” of slowing price rises before cutting rates. But he once again struck a relatively upbeat note on future reductions, adding he was “optimistic” things were moving in the right direction.

Comments subsequently made by BoE Deputy Governor Ben Broadbent also seemed to be potentially paving the way for rates to be cut soon. Speaking at a central banking conference, Mr Broadbent suggested that if things continued to evolve in line with the Bank’s forecasts, it was “possible” rates could be cut “sometime over the summer.”

Last month’s release of inflation data though appears to have dashed hopes of an imminent cut. Although the headline annual CPI rate did fall sharply – down from 3.2% in March to 2.3% in April, primarily due to a large drop in household energy tariffs – the decline was less than had been expected, with both the BoE and economists polled by Reuters predicting a drop to 2.1%.

The next two MPC announcements are scheduled for 20 June and 1 August. While an August rate cut still appears to be a distinct possibility, most analysts now agree that a June reduction looks increasingly unlikely.

Markets (Data compiled by TOMD)

At the end of May, equities were in mixed territory as new inflation data from the eurozone and the US was digested by investors. Inflation stateside came in as expected, while eurozone data was higher than anticipated, fuelling speculation over the pace of rate cuts in both regions.

In the UK, the FTSE 100 index closed May on 8,275.38, a gain of 1.61% during the month, while the FTSE 250 closed the month 3.83% higher on 20,730.12. The FTSE AIM closed on 805.79, a gain of 5.92% in the month. The Euro Stoxx 50 closed the month on 4,983.67, up 1.27%. In Japan, the Nikkei 225 closed May on 38,487.90, a small monthly gain of 0.21%. At the end of the month, the index traded higher as reports circulated about plans for major investments by government-backed pension funds and other large institutional investors.

Across the pond, at the end of May, newly released government data showed that during Q1, the US economy grew slower than initially estimated, and higher-than-expected jobless claims also weighed on sentiment. The Dow closed May up 2.30% on 38,686.32, meanwhile the NASDAQ closed the month up 6.88% on 16,735.02.

On the foreign exchanges, the euro closed the month at €1.17 against sterling. The US dollar closed at $1.27 against sterling and at $1.08 against the euro.

Brent crude closed May trading at $81.38 a barrel, a loss during the month of 5.69%. The price dipped in May primarily due to concerns over future demand. Gold closed the month trading around $2,348 a troy ounce, a monthly gain of 1.79%.

Index

Value (31/05/2024)

Movement Since 30/04/2024
FTSE 100 8,275.38 +1.61%
FTSE 250 20,730.12 +3.83%
FTSE AIM 805.79 +5.92%
Euro Stoxx 50 4,983.67 +1.27%
NASDAQ Composite 16,735.02 +6.68%
Dow Jones 38,686.32 +2.30%
Nikkei 225 38,487.90 +0.21%

Consumer sentiment continues to rise

Although official retail sales statistics for April did reveal a larger-than-expected decline in sales volumes, more recent survey data does point to an improving consumer outlook as households become more optimistic about their finances.

According to ONS data published last month, total retail sales volumes fell by 2.3% in April, following a 0.2% decline in March. ONS said sales fell across most sectors as poor weather reduced footfall but added that it was confident its seasonally adjusted figures had accounted for the timing of the Easter holidays.

Recently released survey data, though, does point to growing optimism for future retail prospects. For instance, May’s CBI Distributive Trades Survey reported a balance of +8 in its year-on-year sales volumes, measuring after April’s slump to -44. The CBI said May’s rise added to “the swathe of data pointing to an improvement in activity over the near-term” and suggested that falling inflation and continuing real wage growth will contribute to a “healthier consumer outlook.”

Data from the latest GfK consumer confidence index also revealed another rise in consumer sentiment. Indeed, May’s headline figure reached its highest level for nearly two-and-a-half years, as households took an increasingly positive view of their personal finances.

Wage growth remains resilient

Earnings statistics published last month showed that wage growth remains strong despite the recent slowing jobs market, although analysts expect pay growth to moderate over the coming months.

The latest ONS figures show that average weekly earnings, excluding bonuses, rose at an annual rate of 6.0% in the first three months of 2024. This figure was the same as recorded in the previous three-month period, defying analysts’ expectations of a slight dip to 5.9%. After adjusting for CPI inflation, regular pay increased by 2.4% on the year, the largest rise in real earnings for over two years.

A survey released last month by the Recruitment and Employment Confederation suggests earnings growth remained high in April, with pay rates for temporary staff rising at their fastest rate in nearly a year. One factor driving this increase was April’s 9.8% minimum wage rise.

Research recently published by the Chartered Institute of Personnel and Development (CIPD) also found that employer expectations for private sector wage rises remain at the same level as reported three months ago. The CIPD did, though, say they expect employers to adjust their pay plans in the coming months as inflation falls and the labour market continues to slow.

All details are correct at the time of writing (3 June 2024)

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice, and the accuracy and completeness of the information cannot be guaranteed. It does not provide individually tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of relief from taxation are currently applied or proposed and are subject to change; their value depends on the investor’s individual circumstances. No part of this document may be reproduced without prior permission.

This material is intended for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Tees is a trading name of Tees Financial Limited, regulated and authorised by the Financial Conduct Authority and registered number 211314.

Tees Financial Limited is registered in England and Wales and registered number 4342506.

Low-income trusts and estates

Posted on by Sophie Soraf
The Spring Budget 2023 laid out several changes to income taxation for low-income trusts and estates. Read on to learn how this may affect you.

Overview of changes

Low-income trusts and estates are those in which income is treated as exempt if it is below the low-income threshold.

The Spring Budget 2023 proposed several changes to the taxation of income for low-income trusts and estates. These changes were enacted by Finance Act (No.2) 2023 and came into effect from 6 April 2024 onwards. The changes impact trusts and estates and have knock-on effects on their beneficiaries.

The intention of these changes was to simplify tax reporting obligations for personal representatives and trustees of low-income trusts and estates going forward .

Impact of Changes to Low-Income Trusts

In the tax years leading up to and including the year ending 5 April 2024, trusts were treated as low-income trusts for a tax year if their savings income was less than £500. If the trust had any non-savings or dividend income, then it would not be a low-income trust.

Starting from 6 April 2024, a trust is treated as low-income in a tax year if its total net income is less than £500. This is an all-or-nothing treatment; therefore, if the net income is above £500, then all the net income is charged to income tax.

Starting from 6 April 2024, an estate is treated as low income for a tax year if the total net income in the year is less than £500. This is an all-or-nothing treatment; therefore, if the net income is above £500, then all of the net income is charged to income tax in that year.

A restriction to the £500 low-income threshold applies for trusts subject to the trust income tax rates, which are currently 45% for savings and non-savings income and 39.35% for dividend income.

The restriction is calculated by dividing the £500 threshold by the number of trusts created by the same settlor, which are:

  • subject to trust income tax rates, and
  • that still exist in the tax year, and
  • have any income in the tax year.

The maximum restriction is £100 per trust.

Trustees will need to assess each year if their trust is a low-income trust. If it is, they will not need to submit a tax return for that year, assuming there is no other reason to do so. There may be years where the trust does not qualify as a low-income trust, in which case the trustees would need to submit a tax return for the year.

Trusts subject to the trust income tax rates have tax pools to record income tax paid by the trustees. When payments are made to beneficiaries, 45% tax credits are attached, reducing the amount of the tax pool.

Trustees of low-income trusts will therefore need to pay tax on distributions of ‘low’ income to make up the tax credits being taken out of the tax pool.

In addition to the changes above, the basic rate and dividend ordinary rate of tax that applied to the first £1,000 of income for trusts subject to the trust income tax rates has been removed. These changes also came into effect from 6 April 2024 onwards.

Beneficiaries of low-income trusts

Beneficiaries of low-income trusts subject to the trust income tax rates will continue to benefit from the 45% income tax credits as they did before.

Beneficiaries of other low-income trusts, such as interest in possession trusts or settlor-interested trusts, will still be liable to income tax on their entitlements to income or receipts of income distributions. In these cases, if the trust is a low-income trust for a given year, the beneficiary will need to report the gross income, since no tax will have been paid by the trust.

Impact of Changes to Low-Income Estates

In the tax years leading up to and including the year ending 5 April 2024, estates were treated as low-income estates if savings income for the whole period of administration was less than £500, and there was no other type of income. If the estate had any non-savings or dividend income, then it would not be a low-income estate.

For estates in administration before and after the changes, the old rules will apply until 5 April 2024, and the new rules will apply starting from 6 April 2024.

Personal representatives of estates can informally report estate income to HMRC by letter instead of submitting tax returns in certain circumstances. In such circumstances, if the estate is a low income estate for a tax year, the personal representatives would not need to report the income for that year to HMRC.

Beneficiaries of low-income trusts

Previously, beneficiaries would need to report any gross income received from low-income estates where tax was not paid by the estate.

From 6 April 2024, estate income treated as exempt for a given year will now be exempt in the hands of beneficiaries when the income is distributed to them.

Spring budget 2024 – key points

Posted on by Sophie Soraf
On 6 March, Chancellor of the Exchequer Jeremy Hunt delivered his Spring Budget to the House of Commons declaring it was “a Budget for long-term growth.” The fiscal update included a number of new policy measures, such as a widely-anticipated reduction in National Insurance, abolition of the non-dom tax status and new savings products designed to encourage more people to invest in UK assets. The Chancellor said his policies would help build a “high wage, high skill economy” and deliver “more investment, more jobs, better public services and lower taxes.”

OBR forecasts

During his speech, the Chancellor declared that the economy had “turned the corner on inflation” and “will soon turn the corner on growth” as he unveiled the latest economic projections produced by the Office for Budget Responsibility (OBR). He started by saying that they showed the rate of inflation falling below the Bank of England’s 2% target level in “a few months’ time.” He noted that this was nearly a year earlier than the OBR had forecast in the autumn and said this had not happened “by accident” but was due to “sound money” policies.

The Chancellor also noted that the OBR forecast shows the government is on track to meet both its self-imposed fiscal rules which state that underlying debt must be falling as a percentage of gross domestic product (GDP) by the fifth year of the forecast and that public sector borrowing must be below 3% of GDP over the same time period. Indeed, in relation to the second rule, Mr Hunt pointed out that borrowing looks set to fall below 3% of GDP by 2025/26 and that by the end of the forecast period it represents the lowest level of annual borrowing since 2001.

In terms of growth, Mr Hunt revealed that the updated OBR projections suggest the UK economy will expand by 0.8% this year, marginally higher than the fiscal watchdog’s autumn forecast. Next year’s growth rate was also revised upwards to 1.9% compared to the 1.4% figure previously predicted.

Cost-of-living measures

The Chancellor also announced a series of measures designed to help families deal with cost-of-living pressures. These included: an extension to the Household Support Fund at current levels for a further six months; maintaining the ‘temporary’ 5p cut on fuel duty and freezing it for another 12 months; an extension of the freeze in alcohol duty until February 2025; an extension in the repayment period for new budgeting advance loans from 12 months to 24 months, and abolition of the £90 charge for a debt relief order.

Personal taxation, savings and pensions

Following previous changes to National Insurance Contributions (NICs) from January 2024, the government announced further changes to take effect this April:

  • The main rate of employee NICs will be cut by 2p in the pound from 10% to 8%, which, when combined with the 2p cut that took effect in January, is estimated to save the average salaried worker around £900 a year
  • There will be a further 2p cut from the main rate of self-employed NICs on top of the 1p cut announced at the Autumn Statement
  • This means that from 6 April 2024, the main rate of Class 4 NICs for the self-employed will reduce from 9% to 6%. Combined with the abolition of the requirement to pay Class 2 NICs, this will save an average self-employed person around £650 a year.

To remove unfairness in the system, changes to Child Benefit were announced:

  • The Child Benefit system will be based on household rather than individual incomes by April 2026
  • From April 2024 the threshold for the High Income Child Benefit Charge will be raised to £60,000 from £50,000, taking 170,000 families out of paying this charge
  • The rate of the charge will also be halved, so that Child Benefit is not lost in full until an individual earns £80,000 per annum
  • The government estimates that nearly half a million families will gain an average of £1,260 in 2024/25 as a result.

The government announced two savings products to encourage UK savings – a new UK Individual Savings Account (ISA) and British Savings Bonds:

  • The new ISA will have a £5,000 annual allowance in addition to the existing ISA allowance and will be a new tax-free product for people to invest in UK-focused assets
  • British Savings Bonds will be delivered through National Savings & Investments (NS&I) in April 2024, offering a guaranteed interest rate, fixed for three years.

Expressing concern that, across the pensions industry, investment into UK equities is only around 6%, the Chancellor announced plans to bring forward requirements for Defined Contribution pension funds to publicly disclose the breakdown of their asset allocations, including UK equities, working closely with the Financial Conduct Authority (FCA) to achieve this.

The non-dom tax regime, available to some UK residents with permanent domicile overseas, is to be abolished. From April 2025, new arrivals to the UK will not have to pay tax on foreign income and gains for the first four years of their UK residency. After that, they will pay the same tax as other UK residents. Transition arrangements will be allowed for current non-doms.

 In addition:

  • As previously announced in the Autumn Statement, the government is working to bring forward legislation by the end of the summer to allow people to invest in a diverse range of investment types through their ISAs
  • The existing ISA allowance remains at £20,000 and the JISA (Junior ISA) allowance and Child Trust Fund annual subscription limits remain at £9,000
  • The Dividend Allowance reduces to £500 from April 2024
  • The annual Capital Gains Tax (CGT) exemption reduces to £3,000 from April 2024
  • The standard nil rate Stamp Duty Land Tax threshold for England and Northern Ireland is £250,000 and £425,000 for first-time buyers, remaining in place until 31 March 2025
  • The Income Tax Personal Allowance and higher rate threshold remain at £12,570 and £50,270 respectively until April 2028 (rates and thresholds may differ for taxpayers in parts of the UK where Income Tax is devolved)
  • There will be a consultation on moving to a residence-based regime for Inheritance Tax (IHT). No changes to IHT will take effect before 6 April 2025 – £325,000 nil-rate band, £175,000 main residence nil-rate band, with taper starting at £2m estate value
  • From 1 April 2024, personal representatives of estates will no longer need to take out commercial loans to pay IHT before applying to obtain a grant on credit from HMRC
  • The State Pension, as previously announced, will go up by 8.5% in April, which means £221.20 a week for the full, new flat-rate State Pension (for those who reached State Pension age after April 2016) and £169.50 a week for the full, old basic State Pension (for those who reached State Pension age before April 2016)
  • ·        The removal of the Lifetime Allowance (LTA) from pensions tax legislation from April
  • As previously announced, the National Living Wage for over-23s – paid by employers – will rise from £10.42 an hour to £11.44 an hour in April.

Business measures

Various business measures announced included the raising of the threshold at which small businesses must register to pay VAT from £85,000 to £90,000 from April 2024. In addition, the Recovery Loan Scheme for small businesses will be extended until March 2026.

Property taxation

The Chancellor also announced the government’s plans to make the property tax system fairer, by:

  • Abolishing the Furnished Holiday Lettings tax regime
  • Abolishing Stamp Duty Land Tax Multiple Dwellings Relief from 1 June 2024
  • Reducing the higher rate of CGT on residential properties from 28% to 24%.

Public services

“Good public services need a strong economy to pay for them, but a strong economy also needs good public services.” This is how the Chancellor introduced the government’s “landmark” Public Sector Productivity Plan which, it says, will restart public sector reform and change the Treasury’s traditional approach to public spending.

Our National Health Service is, said Mr Hunt, “rightly the biggest reason most of us are proud to be British.” He announced £3.4bn to modernise NHS IT systems, which is forecast to unlock £35bn of savings by 2030 and boost NHS productivity by almost 2% per year between 2025/26 and 2029/30.

This includes:

  • Modernising NHS IT systems
  • Improvements to the NHS app to allow patients to confirm and modify appointments
  • Piloting the use of AI to automate back-office functions
  • Moving all NHS Trusts to electronic patient records
  • Over 100 upgraded AI-fitted MRI scanners to speed up results for potentially 130,000 patients per year.

The Chancellor announced a £2.5bn funding boost for the NHS in 2024/25, allowing the service to continue its focus on reducing waiting times for patients.

Mr Hunt also announced £800m of additional investment to boost productivity across other public services, including:

  • £230m for drones and new technology to free up police officers’ time for frontline work
  • £75m to roll out the Violence Reduction Unit model across England and Wales
  • £170m for the justice system, including £55m for family courts, £100m for prisons and £15m to reduce administrative burdens in the courts
  • £165m to fund additional children’s social care placements
  • An initial commitment of £105m to build new special free schools.

Other key points

  • New duty on vaping products to be introduced from October 2026
  • Tobacco duty will be increased from October 2026
  • Air Passenger Duty adjustments to non-economy class rates from 2025/26
  • Energy Profits Levy one year extension from 1 April 2028 to 2029
  • Boosting local growth through a continuation of the Investment Zones programme
  • £1bn in additional tax relief over the next five years for creative industries
  • Housing investment including £124m at Barking Riverside and £118m to accelerate delivery of the Canary Wharf scheme (including up to 750 homes)
  • £120m for the Green Industries Growth Accelerator (GIGA)
  • £7.4m upskilling fund pilot to help SMEs develop AI skills of the future
  • Extension to Freeport tax reliefs to September 2031
  • Extension to and deepening of devolution in England, including the North East Trailblazer Devolution Deal
  • HMRC to establish an advisory panel to support the administration of the R&D tax reliefs.

Closing comments

Jeremy Hunt signed off his Budget saying he was delivering, “A plan to grow the economy, a plan for better public services, a plan to make work pay… Growth up, jobs up and taxes down. I commend this Statement to the House.”

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding of the Budget taxation and HMRC rules and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.

All details are believed to be correct at the time of writing (6 March 2024)

This material is intended to be for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Tees is a trading name of Tees Financial Limited which is regulated and authorised by the Financial Conduct Authority. Registered number 211314.

Tees Financial Limited is registered in England and Wales. Registered number 4342506.

How can I start investing ethically?

Posted on by Sophie Soraf
Here are a few suggestions to get you started:

Know your values

Take time to think about which ethical approaches matter most to you. There are so many different ethical and sustainability issues that it may be hard to find one option that fits everything. Being clear what matters most to you, will help you navigate your way through complexities such as a fossil fuel company that also has a renewable energy project.

Work out where you are already investing

Your current investments, including your pension, may have ethical elements already. You need to know what you’re happy with and what you want to change. You can also consider whether you want all your investments to be based on ethical investing, or just a proportion.

To make changes, you may need to just change the fund, or possibly for a more comprehensive approach, look to a new investment management provider.

How is ESG performance worked out?

The information used to define whether a business is strong on ESG is often subjective. There are multiple frameworks that people use, with different methods of calculation, so it’s impossible to get totally accurate answers – so you should aim for an approximation.

The Financial Conduct Authority (FCA), states that ESG assertions made by companies must be ‘reasonable and substantiated’. The investment research firm, Morgan Stanley Capital International provides a grading system ranking businesses from AAA to CCC. They collate information from published corporate documents, plus academic, government and a range of other databases.

How to choose an ethical investment fund

As well as the usual things to consider when choosing a fund, for example, levels of risk, costs etc, when you want to invest ethically there are a few additional factors to consider. It’s important to ensure that investment companies are genuinely upholding ethical standards. If you look at the fund manager’s website you will often find the answers you need. You need to research the following points and if you can’t find the answers you want, don’t hesitate to ask the investment companies directly. If they are responsive and open that can say a lot about their ethical approach and their attitude to investors generally.

Find out about the following

  • Ethical Investment Policies: Carefully examine the investment company’s ethical investment policies. Look for clear guidelines that outline the specific environmental, social and governance (ESG) factors they consider when selecting stocks. A well-defined, transparent policy should cover areas such as: carbon emissions, working standards, diversity, animal welfare and corporate governance.
  • Their philosophy and screening process: the corporate reporting (such as website, prospectus, annual report) should demonstrate how comprehensively the fund managers are embracing socially responsible investing principles. Look out for impact assessments which can be an indication that the fund is genuinely committed and it is a key element. Be wary of funds that seem to present ESG as a sort of ‘nice box to tick’. Another good sign is if they have robust selection criteria for the stocks they include in their portfolios.
  • Research and data: ideally, you’d want a fund that has its ESG research conducted in-house as that is an indication of its level of commitment to ethical investing. Relying on third-party ESG research gives less reason to be impressed. Ratings, such as those from MSCI, can be a useful guide, however there are a lot of different views as to how these should be assessed and so they may not be that significant in reality.
  • Compare the investment company’s ethical policies and practices with their peers. Look for benchmarking reports that evaluate different investment companies’ ethical performance and compare them across the industry. This analysis can help identify companies that excel in ethical investing and have a proven track record.
  • Voting behaviour and engagement: fund managers should vote at the annual meetings held by the companies they invest in. Proxy voting allows shareholders to exercise their rights and influence corporate decision-making. If they have voted against management at any time, this shows they are willing to engage and have a proactive commitment to ethical investing. You should be able to find this information from their website where they will record how they have engaged with investee companies.
  • Accreditation and Certifications: Are they signatories to the United Nations’ Principles for Responsible Investment (PRI) and the UK Stewardship Code 2020 which is a code that establishes a benchmark for sustainable investment? Additionally, consider certifications specific to industries, such as Fair Trade certifications for companies involved in agriculture or manufacturing.
  • Transparency: Look for investment companies that provide regular and comprehensive reports on their portfolio holdings and their performance against ethical criteria. Check to see whether you can see the whole of a fund’s portfolio and that listings are not limited, for example, to the top 10 holdings. You need to be able to see and check all the underlying companies to be knowledgeable about how socially responsible the investments are.

How can I match my values to the right investment?

To effectively align investments with your values, you need to ethical investment companies that offer the following:

  • robust screening and selection process: they should have a rigorous screening process to identify stocks that meet specific ethical criteria. This process involves assessing environmental, social, and governance (ESG) factors and excluding companies involved in industries or practices that conflict with the investor’s values. Clear guidelines should be in place to ensure transparency and consistency in stock selection.
  • customisation and flexibility: they should offer customisation options to accommodate individual investors’ values. This may include providing different investment themes or portfolios aligned with specific causes, such as climate change, gender equality, or human rights.
  •  regular portfolio reviews: they should conduct regular reviews of their portfolios to ensure ongoing alignment with investors’ values. This involves monitoring the ESG performance of companies held in the portfolio and making adjustments as needed. If a company’s practices no longer align with ethical standards, the investment company should consider divesting from that stock and finding alternatives that better meet the investor’s values.

Environmental, Social and Governance (ESG) investing has become an increasingly important focus for many of our clients.

There has been a substantial rise in the popularity of sustainable and ethical investments in recent years, driven by an increasing desire for investors to know where and how their money is being invested.

However, while these products have now become an established part of the mainstream investment landscape, many people remain confused about the terminology associated with this type of investing and are often unsure as to how to get started.

What is ESG investing?

ESG investing involves considering environmental, social and governance factors alongside financial considerations when assessing investment opportunities. When investment managers are deciding which companies to invest in, they may seek out and include companies based on their ESG characteristics.

Environmental factors refer to how companies are performing in their stewardship of the environment, for example:

  • Carbon footprint
  • Energy consumption
  • Greenhouse gas emissions

Social factors consider how companies manage relationships with employees, suppliers, customers, and the areas where they operate, for example:

  • Human rights and social justice
  • Working conditions and employee relations
  • Health and safety standards

Governance factors focus on company leadership, for example:

  • Board diversity, structure and pay
  • Avoidance of bribery and corruption
  • Management & culture

ESG investing offers the potential to invest in ways that reflect the values that are important to you through using investment solutions that aim to take related ESG characteristics into account.

However, with investment managers and funds using varying terms such as Ethical, Sustainable, Socially Responsible, Impact Investing or simply Green, it can be difficult for clients to really understand what these labels truly mean and how they translate into an investment strategy that matches their personal views and reflects the values that are most important to them.

Ethical investing

One of the most well-known terms is Ethical Investing. This involves actively avoiding those types of firms or industry sectors which are considered to have a negative impact on the environment or society. This approach is also known as ‘negative screening’ as it involves filtering out specific types of investment based on a series of ethical or moral judgements.

For instance, negative screening may exclude all gas and oil companies regardless of whether a firm operating in the sector generates any form of green energy. Other types of excluded ‘sin stocks’ typically include the likes of alcohol companies, tobacco producers, weapons manufacturers, the gambling industry and firms involved in animal testing.

Sustainable Investing

Sustainable Investing uses ESG principles to actively select those companies that have a positive impact on the world, often in line with the United Nations Global Goals for Sustainable Development. This approach is therefore less restrictive than ethical investing as it allows for the fact that organisations are typically not either all good or all bad.

For example, under a sustainable investment strategy, a fund manager would be allowed to invest in an oil company that was developing clean, renewable energy sources.

Socially Responsible Investing (SRI)

SRI is one of the oldest ethical investment strategies, which involves focusing on a range of socially conscious themes such as employment rights, awareness of LGBTQ factors, social justice and corporate ethics.

Impact Investing

This involves using an investment strategy which targets those companies that have a positive social and/or environmental impact whilst demonstrating high levels of accountability and governance.

Green Investing 

Green Investing involves a strategy of selecting companies considered to be positive for the environment, such as those offering alternative sources of energy or those with a proven track record in reducing their environmental impact.

Are ESG funds higher risk?

There was often a perception in the early days of ESG investing that investors were putting principles before profit, with ethical or green investments generally considered to be significantly riskier than their traditional counterparts. Nowadays, however, with more and more companies adopting ESG principles within their corporate and social governance policies, there is a much wider choice of stocks available to ethical and sustainable investors, and so this style of investing can provide a compelling investment opportunity capable of generating long-term stable and sustainable returns.

Our bespoke planning process

Building a strategy around your personal core beliefs aimed at delivering financial success is central to our planning process.

One of the challenges with ESG investing is that it’s highly subjective; whilst you may want to prioritise the social impact companies can have, others may be more concerned about the environmental effects. It’s worth spending some time thinking about what is most important to you.

At Tees, as your independent financial adviser, we will work with you and take the time to truly understand your values including any ‘red lines’ you may have and where you may be willing to compromise. We take account of your financial aspirations and plan for how these can be delivered via an ESG investment strategy, that is tailored to you, so that you can feel comfortable with the investment decisions you are making.

We will also seek to understand the balance between your views and overall financial performance, as well as what impact you want your investment to have – i.e: to ‘do no harm’, or to ‘do good’.

‘Do no harm’ or ‘do good’

Seeking to invest in companies that promote ESG values that are important to you is referred to as positive screening, as you look to ‘do good’.  This may mean actively looking for opportunities in certain sectors or even dedicating a portion of your portfolio to this area.

Let’s say climate change and fossil fuel use are something you want to reflect in your investments. A negative, or ‘do no harm’ screening process may mean cutting out firms that are involved in the fossil fuel industry. In contrast, a positive ‘do good’ screening method could mean diverting a portion of your portfolio towards companies that are focused on renewable energy.

When looking to build an ESG investment strategy, it’s important to bear in mind that there often needs to be compromise, rather than trying to find a portfolio which exactly matches a particular set of ethical values. There is no such thing as 100% good or bad.

Ongoing monitoring of investment managers and performance

We continually monitor the investment managers that we recommend and hold them to account to ensure that their investment strategies remain in line with the policies and beliefs for which their investments were selected on your behalf.

Monitoring and engaging with investment managers encourages good behaviour and is the best way to ensure they are practising what they are preaching.

We will also look to benchmark an investment manager’s performance comparative to their peers as well as assess performance against mainstream funds. There may be times when an ESG portfolio underperforms compared to traditional investments, as certain stocks (and indeed, whole sectors) can move in and out of favour during periods of economic and political stability.

We will look to focus on your overarching investment goals to ensure that we maximise your investment returns whilst continuing to invest in companies that work hard to manage their legacy and impact on the world.

There’s a great deal to consider when assessing ESG investment opportunities. Our clients tell us that taking professional independent financial advice from Tees, helps them to invest their money more in line with their core values and beliefs.

This material is intended to be for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Tees is a trading name of Tees Financial Limited which is regulated and authorised by the Financial Conduct Authority. Registered number 211314.

Tees Financial Limited is registered in England and Wales. Registered number 4342506.

Release equity from your house: Increase your income

Posted on by Sophie Soraf
As we’ll explain in this article, equity release is just one of several options that are now available to over 55s who wish to increase their income. Here at Tees our Equity Release Council member and SOLLA accredited experts are on hand to help and advise you every step of the way.

We’re all living longer and often, retiring later.

Changes to the state pension age, along with anticipated shortfalls in many private pensions, mean that we’re likely to need to look to alternative solutions as to how to fund our lifestyles in or approaching retirement – or risk relying on debt in later life.

In the past five years, the total value of debt held by the over-55s is estimated to have increased by 47 per cent and in another five years, this total value is forecast to increase by 35 per cent, rising to £397bn by 2024.

The good news is that the options to increase your income in later life are growing, becoming much more attractive – and can offer you peace of mind.

Since the government introduced pension reforms in 2015, the financial services industry as a whole – including the mortgage market – has begun to catch up with the challenges and opportunities of social change and consequently, lending criteria relating to age and retirement status have become a good deal more flexible.

Only a few years ago, there might have been a small handful of building societies prepared to lend to people of older age, however today, the options are many and varied and the previously niche equity release market has seen rapid growth and development into an industry that is now more commonly referred to as the later life lending market.

It is estimated that the UK’s over-55s currently own £1trillion in housing wealth.

What is later life lending?

Put simply, it is a mortgage offered to the over 55s that is designed to let you make use of the money that’s built up in your home and help you live better in your retirement.

What are the different types of later life lending?

Lifetime Mortgage

This is a form of equity release that lets you unlock the value in your home as a tax free lump sum of money.

How does equity release work?

Equity release is essentially like a long term loan. However, you don’t have to make monthly payments, unless you choose to, and the loan is usually repaid when the last borrower moves into long term care or dies, and you keep full ownership of the property. The maximum loan amount depends on your age and how much your property is worth.

Equity release may not be right for everyone. It may affect your entitlement to state benefits and will reduce the value of your estate.

Retirement Interest Only (RIO) Mortgage

A retirement interest only mortgage is very similar to a standard interest only mortgage, but with some differences.

The main part of the loan (capital) is usually only paid off when the last borrower moves into long term care or dies and you only have to prove you can afford the monthly interest payments.

Retirement Capital & Interest (RCI) Mortgage

Much like a standard repayment mortgage you pay back both interest and capital on a monthly basis.

The main difference is that you can borrow up to a higher age than on a standard mortgage but the product is still designed to repay your mortgage in full by the end of your term.

You’ll need to be able to afford the repayments on a monthly basis.

Home Reversion Plan

A Home Reversion Plan allows you to access all or part of the value of your property while retaining the right to remain in your property, rent free, for the rest of your life.

The plan provider will purchase all or part of your house taking into account your age and your health and will provide you with a tax free cash lump sum (or regular payments) and a lifetime lease, guaranteeing you the right to stay in your property rent-free for the rest of your life.

Is borrowing in later life right for me?

It’s often a good idea to speak with family members or trusted friends before taking on further borrowing in later life, they can often offer support and suggest other ways you could raise money. Borrowing in later life can have an impact on inheritance amounts you leave and any state benefits or local authority grants you get.

Is it wise with increasing interest rates for parents to release equity to assist in paying off or reducing their children’s mortgages?

This is a complex decision and will depend on various factors, here are some considerations:

  • Helping your children may be beneficial if you have excess funds and you are in a financially stable situation. It’s important to ensure that you have enough savings for your own needs and emergencies before considering assisting your children with their mortgages.
  • Releasing equity from your home may affect your retirement plans. It’s crucial to evaluate how using this equity will impact your future financial security, as you may be reducing the value of your estate or limiting your access to funds in the long term.
  • Before considering equity release, explore other possibilities for helping your children with their mortgages. For instance, you could recommend they seek financial advice or explore other forms of financial support that may not have long-term consequences for your own financial situation.
  • While helping your children reduce their mortgage loan can be beneficial, it’s essential to involve them in the decision-making process. Make sure they understand the implications and responsibilities associated with receiving financial assistance.
  • Releasing equity from your home may have tax implications, such as potential inheritance tax considerations.
  • Releasing equity may reduce your financial flexibility. Consider whether you may need access to the equity in the future for other purposes, such as long-term care costs or other unforeseen circumstances.

Ultimately, the decision to release equity to assist your children with their mortgages depends on your financial circumstances, risk tolerance, and long-term goals. It’s advisable to seek advice from a qualified financial adviser who specialises in this area of advice or a mortgage specialist who can provide personalised help and guidance on your specific situation.

Can I apply for a later life mortgage?

Many lenders will consider applications from people aged 55 up until their 85th birthday, with some lenders offering existing customers a mortgage up to their 95th birthday.

What can the money be used for?

The money released can be used for lots of different things. Some common uses include home improvements, family gifts,  funding the purchase of a further property, buying a car, travelling abroad, or funding care. 

Example

Mrs Hurst needed to carry out improvements on her home and gift her daughter money to aid her in buying a house. At the time, she held a lifetime mortgage previously arranged with another lender at an uncompetitive rate of 7.19%.

In order to achieve her goals, Mrs Hurst required an urgent loan of £226,160 and a more competitive rate of interest than her existing lifetime mortgage.

Tees’ Solution

Utilising a ‘whole of market’ approach, a new Lifetime Mortgage product was secured for Mrs Hurst, offering a significantly lower rate of interest of 3.92%.

As well as releasing an initial loan, Mrs Hurst released an additional £32,665 in order to fund the necessary £25,000 for home improvements and £10,000 to aid her daughter’s home purchase.

Even though the transaction involved releasing additional equity from her home, the lower rate of interest that was secured for Mrs Hurst on her new Lifetime Mortgage arrangement has resulted in a total saving of £256,049 of mortgage interest payments over a 15 year period, compared with if she had remained with her previous lender.

Outcome

The savings we secured for Mrs Hurst means she is now more able to enjoy a more comfortable retirement.

Our clients come to us for many different reasons. One of these is we offer lenders from the whole market and are able to access low rates. This ensures our clients can enjoy their retirement to the fullest and get the most out of the value of their home.

The Tees difference: a bespoke service that’s focused on delivering what you really need

Toni Chalmers-Smith is a later life lending specialist at Tees who has worked in the financial services industry for over 25 years. While fully qualified in all forms of life, health, mortgage and pension business, Toni is expert in advising clients who require later years advice, which includes investments, inheritance tax and estate planning, equity release and care fees planning. Toni works closely with Tees’ legal advisers in providing specialist advice on all areas of later life lending and also offers older clients a financial review and support service, especially if an individual or family member is unable to cope with day to day financial decisions.

Catherine Banks is an experienced solicitor in Tees’ residential conveyancing team, and specialises in later life lending conveyancing. Together Toni, Catherine and the rest of the Tees team work seamlessly together to ensure that the solutions they provide truly fulfil your needs, and are fully tailored to your individual circumstances.

Toni and Catherine pride themselves on offering a friendly, personal service which is designed to put you at ease and support you in these important financial decisions. Their approach is highly ethical; when dealing with older clients where there may be a vulnerability concern Toni can offer an advisory service and where necessary, work with a Power of Attorney and/or make an application to the Court of Protection on your behalf.

Expert financial and legal advice all under one roof

There are many advantages of having your financial advice and legal conveyancing services all under one roof:

  • a fast, efficient, joined-up service that is second to none
  • transparency in terms of our fees and any associated costs
  • a fully comprehensive service that is highly cost-effective

We at Tees strongly believe that financial and legal advice should take you to the stage where you can make clear and informed decisions, happy in the knowledge that you have received all the information and choices needed to reach those decisions.

Toni is a SOLLA Accredited Adviser and operates under its strict code of conduct. Both Toni and Catherine are members of the Equity Release Council: https://www.equityreleasecouncil.com/

Only specialist advisers can offer equity release advice.

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All legal services provided by Tees are regulated by the Solicitors Regulation Authority. Tees is a trading name of Stanley Tee LLP is authorised and regulated by the Solicitors Regulation Authority (SRA Number 464615) and is registered in England and Wales number OC327874.

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Office locations
Bishop’s Stortford
Brentwood
Cambridge
Chelmsford
North Herts
Saffron Walden

Financial services:
Legal notices | Privacy notice

Legal services: Legal notices | Privacy notice

Fee information | Cookie Policy

Linkedin Facebook Youtube

All legal services provided by Tees are regulated by the Solicitors Regulation Authority. Tees is a trading name of Stanley Tee LLP is authorised and regulated by the Solicitors Regulation Authority (SRA Number 464615) and is registered in England and Wales number OC327874.

All financial services provided by Tees are regulated by the Financial Conduct Authority. Tees and Tees Wealth are trading names of Tees Financial Limited which is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales number 4342506. Registered office address Tees House, 95 London Road, Bishop’s Stortford CM23 3GW.

Copyright © 2025 Tees Law. All rights reserved.

tees-logo-v1

Financial services: Legal notices | Privacy notice
Legal services: Legal notices | Privacy notice
Fee information | Cookie Policy

Office locations
Bishop’s Stortford
Brentwood
Cambridge
Chelmsford
North Herts
Saffron Walden

Linkedin Facebook Youtube

All legal services provided by Tees are regulated by the Solicitors Regulation Authority. Tees is a trading name of Stanley Tee LLP is authorised and regulated by the Solicitors Regulation Authority (SRA Number 464615) and is registered in England and Wales number OC327874.

All financial services provided by Tees are regulated by the Financial Conduct Authority. Tees and Tees Wealth are trading names of Tees Financial Limited which is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales number 4342506. Registered office address Tees House, 95 London Road, Bishop’s Stortford CM23 3GW.

Copyright © 2025 Tees Law. All rights reserved.

tees-logo

0800 0131165

Linkedin Facebook Youtube

Financial services:
Legal notices | Privacy notice
Legal services:
Legal notices | Privacy notice

All legal services provided by Tees are regulated by the Solicitors Regulation Authority. Tees is a trading name of Stanley Tee LLP is authorised and regulated by the Solicitors Regulation Authority (SRA Number 464615) and is registered in England and Wales number OC327874.

All financial services provided by Tees are regulated by the Financial Conduct Authority. Tees and Tees Wealth are trading names of Tees Financial Limited which is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales number 4342506. Registered office address Tees House, 95 London Road, Bishop’s Stortford CM23 3GW.

Copyright © 2025 Tees Law. All rights reserved.

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