Through the end of last week, the S&P 500 index fell by 23.4% from its January 2022 record high peak. The index moved into bear market territory after the Federal Reserve (the Fed) voted to raise rates by 0.75% at its June meeting. Jerome Powell, chairman of the Fed, reiterated that they are committed to cooling inflation, and are willing to accept lower growth and higher unemployment targets to counter it. Inflation fears that had turned into a growth scare have now seemingly turned into a recession obsession. Today, we discuss why we believe this is a slowdown in the US and not a recession.

US Consumer

The University of Michigan Consumer Sentiment Index is at its lowest point ever. Consumers are pessimistic. Probably due to the fact that all they hear about is the risk of recession, with a daily reminder of inflationary pressures when they fill up the car at the pump. On top of this, the stock market is now at year-to-date lows, which makes things worse. However, we believe the situation is not as bad as it looks.

True, the US just had its first quarter of negative growth (-1.5%) since the pandemic in 2020, but the data behind this is more solid than it appears. Economists are suggesting that the negative growth is coming from a correction post-Covid, due to a trade deficit and firms trimming their inventories. Consumer spending is actually growing, income is rising in the US, and it is not due to an increase of debt.

Source: Bureau of Labor Statistics of Federal Reserve Bank of Atlanta

In fact, credit card debt, as a percentage of total debt, is currently at a 20-year low and Americans are seeing wages rise, especially low earners. Inflation is still having a negative impact on these gains, but the Fed estimates that once the rate of inflation falls below 6% (currently at 8.6% year on year), real wage gains could be restored.

US Outlook

Last year’s 5.7% GDP growth rate was not sustainable. This was mainly supported by Biden’s spending plan and the accommodative Fed. US growth had to slow down this year and it has come back to “normal” levels of around 2% per year. This is similar to US GDP growth of around 2.1% per year for the decade prior to Covid.

Another positive sign are the business surveys published on a monthly basis, such as the ISM Manufacturing and Services PMI. Even if they have recently deteriorated, especially compared to last year, they are still far from levels seen during previous recessions.

Finally, it is true the spread that high-yield borrowers must pay above government borrowing costs has widened. The gap has recently reached the 5% premium mark, which is the historical average for the US. However, it is still well below the 7.5% that we see in advance of a typical recession. This is a signal to watch out for if the gap continues to grow.

US High Yield Borrowing Costs vs Government Bonds

Source: TradingView; Index: 1m ICE BofA US High Yield Index Option-Adjusted Spread

Overall, the odds for a recession have risen, especially due to the spike in interest rates, but we do not feel we are there yet. Some investors and the media can give the impression that the current situation is worse than in 2008, when actually the economic landscape today is healthier. Within our diversified portfolios we have held exposures to defensive equities that have performed well when compared to wider indices containing big names. We have also slightly increased our cash exposure across portfolios, ready to re-deploy when opportunities arise.

When markets are volatile, it can be easy to worry about your portfolio. After all, it can be painful to see its value fall when you have worked so hard to build it up.

In recent weeks, the war in Ukraine, inflation and rising interest rates have created a significant amount of turbulence in financial markets. As fears of economic recession become more pronounced, many investors have become increasingly jittery.

If the recent volatility has concerned you, read on for four useful tips on how to stay calm during periods of uncertainty.

1. Try to avoid checking your portfolio regularly

In the past few years, smartphones have become an essential part of our lives. Not only do they help us to communicate effectively but they also give us access to a wealth of information at the touch of a button.

Having instant access to the status of your investments can be a problem when markets are struggling. It can be tempting to check the value of your portfolio every day, even if doing so could make you feel more stressed.

During periods of volatility, it is important to exercise self-restraint and check on your investments less frequently, such as at the end of the month or even once a quarter.

Avoiding constantly checking the status of your portfolio can help you to stay calm and avoid unnecessary stress. You don’t check the value of your home every day and, similarly, there is no need to check the value of your investments so regularly.

2. Be patient and focus on the long term

As difficult as it can sometimes feel, during periods of uncertainty, it is important to be patient and remember that markets typically recover.

The graph below shows the value of the FTSE All-Share Index from May 2006 to June 2022. As you can see, there have been several notable falls in the past few years, from the 2008 financial crisis to the recent coronavirus pandemic.

Source: London Stock Exchange

But while the value of the index fell at times, it generally climbed steadily back once the financial fallout had settled.

Volatility is an inherent part of investing; just as there are periods of growth, there are also periods of contraction. But as you can see from the graph, the former greatly outweigh the latter and even if markets fall, they typically recover over time.

Even if your portfolio has experienced volatility, it is important to keep a cool head. Remember – investing is a marathon and not a sprint!

3. Don’t panic-sell when an asset falls in value

During periods of economic turbulence, one common mistake that some investors make is to sell as soon as assets fall in value. While doing this may make you feel better, it can be bad for your financial wellbeing.

The knee-jerk reaction to panic-sell is understandable in theory, as you don’t want to see your assets fall further in value. However, doing so could simply mean that you turn a theoretical loss into an actual one.

A good example to compare this to would be house prices. If the value of your home unexpectedly plummeted in value, you would not immediately pack up your belongings and sell it. Instead, you would keep calm and have faith that the housing market will recover in time.

Applying this same logic to your portfolio can help to prevent you from panic-selling and regretting it down the line.

4. View volatility as an investment opportunity

If you want to reduce your anxiety during periods of economic turbulence, it can help to view it not as a problem to overcome but as a potential investment opportunity.

As we mentioned earlier, during times like this, some investors lose their nerve and panic – selling off their assets at a loss. This can give you the opportunity to buy into the market at a reduced price and then wait as they rise in value again over time.

By investing when prices have fallen, you could acquire assets at advantageous prices and make very lucrative decisions. While market volatility is a fact of life, it does not have to be something that you fear; it can be an opportunity to grow your wealth.

As we discussed in a previous article, doing so can help you to build your portfolio much more effectively.

Of course, if you want to ensure that you make properly informed decisions when investing, it can be helpful to seek professional advice. A planner can assess your personal circumstances, long-term goals, and risk tolerance to help you to build your wealth in the most effective way.

Get in touch

If you would like to discuss the current state of the market or simply want some reassurance that you are on track to meet your long-term goals, we can help. Email enquiries@bowmorefp.com or call us on 01275 462 469.

Please note:

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.

Bowmore Financial Planning Ltd is authorised and regulated by the FCA.

For many years, the traditional “cliff-edge” style of retirement was the norm. You left work on Friday and woke up the following Monday as a “retired” person, able to spend your time however you wished.

While the traditional approach certainly has its advantages, in the past few years more and more people are choosing to take a more flexible retirement. In fact, according to data from Professional Adviser, two-thirds of people set to retire in 2022 plan to keep working in some capacity.

Read on to find out some of the advantages of “flexi-retirement” and whether it might be right for you.

Flexi-retirement lets you ease your way into retirement

Since 2015, Pension Freedoms legislation has given Brits more flexibility than ever before as to how they access their pension wealth. From the age of 55 (57 from 2028), you can draw an income while continuing to work in some capacity.

Flexi-retirement allows you to slowly reduce your work hours and ease yourself into your retirement. This might involve a job-sharing role, working part-time or even staying on as a consultant or setting up your own business.

Because IT skills are in demand, there are ample opportunities for professionals to find highly paid part-time work. Even just spending a few days of your week working can potentially be very lucrative.

Taking a flexible approach can give you a higher income when you draw your pension

One of the biggest advantages of continuing to work is that you will be able to keep building your pension wealth and, should you remain an employee, you could benefit from tax relief and employer contributions for a longer period.

It may also mean that you can draw income from your existing pensions much more slowly. This can help you to rest easy knowing that you will have enough to support you throughout your retirement.

When you decide you are ready to retire fully, you are likely to have a greater amount of wealth built up that will not have to support you for as long. This can give you a higher income and make it more likely that you can realise your retirement dreams.

Allow your pension the potential to enjoy growth for longer

Another benefit of flexi-retirement is that since you leave your pension wealth untouched for a greater amount of time, the funds could benefit from further compound growth. Ultimately, this can mean your funds are much larger than they would otherwise have been.

As you approach your retirement, pension providers usually change the balance of investments within your portfolio. Essentially, this helps to protect it against any unexpected market falls that could reduce the value of your assets and so affect your plans.

Of course, one of the consequences of moving from higher-risk investments to safer ones is that it can limit your possible returns. As you will know, there is generally a positive correlation between how much risk an investment poses and how high the returns it may offer are.

If you opt for a flexible retirement, since you would not need to access your pension as urgently, you could see more growth as you could leave your funds invested for longer.

Working flexibly can help you stay close to friends and colleagues

While taking a flexible approach to retirement can benefit you financially, there are social benefits, too.

Over the course of your career, you will have made many friends at your workplace but when you retire you may not be able to see them as often as you once did.

Working part-time or in a consultancy role can help you to keep in touch with these colleagues. By seeing them on a semi-regular basis, you can maintain your social circle even after you have retired.

While it may not be widely talked about, loneliness can be a real problem in retirement. According to a recent study by Age UK, around 1.4 million older people in the UK struggle with feeling lonely.

If you want to enjoy your retirement to the fullest, having these opportunities to see your old friends and colleagues can be invaluable. This is why flexi-retirement can be so useful, as it not only boosts your pension wealth but your mental health too.

Be careful to avoid potential tax pitfalls of flexi-retirement

While flexi-retirement has many advantages, it is important to be aware that there are potential tax considerations to bear in mind.

One of the most significant is the Money Purchase Annual Allowance (MPAA).

When you pay into your pension, you can benefit from tax relief, with the amount you receive equivalent to the rate of tax you pay. For example, if you paid the additional rate of tax, you would benefit from 45% relief when you made a contribution.

Due to this valuable benefit, there is a limit on how much you can pay into your pension each year while still receiving relief. This is known as your “Annual Allowance”, which, in 2022/23, is £40,000 or 100% of your annual earnings, whichever is lower.

However, once you begin to draw a flexible income from your defined contribution (DC) pension, the MPAA is triggered and your Annual Allowance is reduced to just £4,000.

If you are unaware of this, you could find yourself facing an unexpected bill and lose the chance of saving effectively.

We can help you make the most of a flexible retirement

If you are interested in a flexible retirement, seeking professional advice can help you to avoid any unexpected issues and build pension wealth in the most effective way.

When you work with a planner, you can rest assured that you are on track to enjoy the retirement you want. Email enquiries@bowmorefp.com or call us on 01275 462 469.

Please note: A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

The value of your investments can go down as well as up, so you could get back less than you invested.

Bowmore Financial Planning Ltd is authorised and regulated by the FCA.

Last month, you read about Bowmore’s research in the press, our charitable endeavours, and success both in awards and exams.

This month, there is much to report from Bowmore HQ. Our colleagues’ involvement in the epic Ride for Precious Lives continues; plus, we hear from a young member of the Bowmore Asset Management team about her role.

In conversation with Stephanie White

Stephanie White is a trainee investment manager here at Bowmore. We caught up with Stephanie about her journey at Bowmore so far, and her hopes for the future of sustainable investing.

So, Steph, when did you join Bowmore?

It’s coming up to three years – I joined in September 2019. Time flies…

What was it like joining the team so close to the start of the pandemic? That must have been tough.

When I joined, we all got to know each other very quickly. We work collaboratively and communicate all day every day, so when we started working from home, luckily it wasn’t too hard. I am very lucky to have some outside space at home and I don’t live alone, which made it all easier too.

What drew you to the role of investment manager?

It was really natural. I’ve always had a passion for sustainability, so seeing the massive popularity of responsible investing grow, that was something that really excited me. I think we’re at a tipping point – things are changing and I want to be part of that change.

Following on from that, how has it felt to be learning this role in an unprecedented era of volatility?

It’s unique, I suppose. I find it really interesting speaking to more experienced team members who remember the financial crisis and learning what that era was like.

Yet this time is completely new – we’re living in a very strange time. It’s easy to get bogged down in all of the negative news and crises happening. Hopefully, I’ll be able to share the lessons I’ve learnt during this time with new colleagues in years to come.

How do you look after your mental health in a job where so many external forces will affect the outcome of your work?

Well, it’s important to remember that the market can behave like a very young child. The child has a toy, then it throws the toy away and picks up a new one.

So, everything will pass. It’s unlikely that we’ll face the same issues in five years’ time that we are facing today. Knowing that time will progress everything along really does help.

Plus, at the moment, I’m studying for an exam – that takes my mind off things and helps me focus.

Which exam are you studying for?

My next exam is the CFA ESG. It’s an important accreditation within sustainable investing, so I’m both excited and nervous.

It’s also very different to the others because it’s not at all mathematical. Instead, it drills down into the major themes of sustainable investing and the meaning behind certain words, like “responsible” and “ethical”.

I’ve done six exams so far and will have three more to do before I’m fully qualified. I’ve got to know the people at the test centre now, which is nice.

Good luck for it. It sounds like you’ve got a great routine going. Coming back to your role, what would you say is your favourite thing about training in investment management?

I’m really enjoying the research side of the investment process at the moment. I’m very lucky to be guided by Johnny (Webster-Smith), Max (Petite) and Owen (Moore) from the investment team, who have a great deal of experience behind them.

On the other side of things, is there anything about your role you have found unexpectedly challenging?

Right now, it is just confidence building, which takes time. Having the confidence to ask questions, for example, or request an explanation when you don’t understand things.

For example, it does take confidence to put your hand up and say, “I don’t understand.”

I’ve been really lucky with how supportive the team is, so I suppose it’s about building my own confidence over time. There’s no shortcut, really, and I believe working up my confidence is better than being overconfident on day one.

Lastly, what advice would you give someone – particularly a young woman – who wants to train as an investment manager?

I would say: “Go for it!”

There’s room for everyone. Build up your experience, get your qualifications, work hard and remember that Rome wasn’t built in a day.

Duncan and Mark continue their training for the 205-mile Ride for Precious Lives

Since February, our financial planner Mark Millet and paraplanner Duncan Harvey, have been training to complete the Ride for Precious Lives 2022 in support of Children’s Hospice South West (CHSW).

Mark and Duncan are fast approaching July’s big race date. Before we hear from them, here is a reminder of the work CHSW do and why Bowmore are committed to supporting them through this charitable endeavour.

About Children’s Hospice South West and the Ride for Precious Lives

CHSW supports terminally ill children and their families through the unthinkable every single day.

For more than 30 years, the centre has provided palliative care for children, a sibling service for other children in the family, support for parents and a bereavement service.

On average, children’s hospices receive only 17% of their budget from the government; the rest of their care is funded by generous donations by members of the public.

For CHSW, providing support to ill children and their families costs £11 million a year.

The Ride for Precious Lives is one of CHSW’s most important annual fundraising events. Each year, hundreds of cyclists complete a 205-mile journey through the south-west to raise money for the hospice.

This year, the three-day event will be held between 8 and 11 July. Our colleagues,  Mark and Duncan, have taken on the challenge of completing the ride in support of CHSW.

You can read about the incredible work CHSW does every day on their website and can donate to the Ride for Precious Lives via our JustGiving page.

Words from Mark Millet as the Ride for Precious Lives 2022 approaches

“Well, it’s about six weeks now until we embark upon the challenging Ride for Precious Lives. Eek!

“Everything is becoming very real – our weekly training is going well, with the emphasis now being on hills and the challenges they bring. We are not calling them ‘hills’, just ‘undulations’ – it helps us mentally.

“We have had our fair share of trials and tribulations so far with training, the latest of which was the steering failure on my bike. Fortunately, we found out about that before I was hurtling down a hill!

“I’ve had my second bike fit and am now trying to decide on the most comfortable saddle for the ride. This is clearly a delicate matter; a high degree of comfort is essential, given the 205 miles we intend to cover.

“We are building our sponsorship which has gone up steadily, but we still need your support. You can donate to support CHSW via our JustGiving page or by scanning the QR code.

“Many thanks to those that have already given. It’s such an important cause and your generosity will assist up and down those hills. I mean, undulations…”

We are all aware by now that humankind is putting a huge strain on planet Earth. As we continue to live our lives and pursue opportunities that make us happy, we could be inadvertently harming our environment at the same time.

On a positive note, during the Covid-19 pandemic, emissions decreased significantly. According to the Office for National Statistics (ONS), UK household emissions dropped by approximately 10% in 2020.

While we stayed at home to protect our friends, family and neighbours, we also unknowingly reduced our carbon footprint by living simpler lives.

If you would like to continue playing your part in protecting the planet after positively contributing during the pandemic, you may already be maintaining environmentally friendly habits in your household.

However, you might be increasing your carbon footprint unknowingly.

Read on to find out three shocking ways you could be harming the planet, and some simple solutions for reducing their effects.

1. Returning unwanted goods in exchange for a refund

We have all done this – in fact, many of us return items on a regular basis.

Since the birth of the online shopping era, returning unwanted items has become a common practice for most people. Research published by CNBC claims that items bought online are three times more likely to be returned than those bought in a store.

Perhaps you are not sure which size of clothing to order, so you order two sizes, and simply return the item that does not fit? Maybe you are unhappy with how a product looks once it is in your hands, so you opt to send it back. No big deal, right?

Unfortunately, your returns are highly likely to go straight to landfill. BBC Earth reports that each year, 2 billion kilos of waste are generated by returns alone.

The reason for this is simple yet sad: for the companies providing the products, it is usually cheaper to throw away brand-new items than to return them to a warehouse, repackage them and sell them on.

As an alternative to returning items you do not want, you could sell them second-hand, donate them to charity or give them to friends.

Be selective about what you order online in the first place and you could find you are returning fewer items and reducing your carbon footprint in the process.

2. Eating organic meat

Typically, consumers see the word “organic” and assume a product is good, or at least better, for the environment.

Indeed, you may already know that eating mass-produced animal products can have a detrimental effect on the planet. Since the release of now-famous documentaries such as Netflix’s Cowspiracy and Seaspiracy films, alongside widely-published environmental research, it has become common knowledge that factory-farmed meats and overfishing are bad for the planet.

However, what you may not know is that despite its seemingly benevolent label, organic meat has just as heavy a price when it comes to the environment.

Research published by the Guardian has found that, surprisingly, organic meat production has an equally damaging impact on the planet as that of non-organic meat.

The same research found that if a “meat tax” were introduced in order to neutralise its cost to our planet, conventional meat would need to become approximately 40% more expensive. On balance, organic meat prices would need to rise by 25%, because its original price is typically more expensive already.

So, unfortunately, by shopping for organic meat as a planet-friendly alternative to mass-farmed products, you may not be reducing your carbon footprint as much as you had hoped.

Luckily, there is a simple and effective solution: lower your meat consumption altogether, and your carbon footprint is likely to follow suit.

3. Wearing “coral reef unfriendly” sunscreen

When you book a summer holiday, it is likely you pack the same key essentials every time: swimsuits, sunglasses, hats and sunscreen.

When it comes to the type of sunscreen you buy, you may already have a preference. Perhaps you pick the most cost-effective brands, or choose your sunscreen based on the level of SPF it provides?

However, when you set off on your holidays this summer, it may be worth adding another criterion to your list: is my sunscreen coral reef friendly?

Indeed, research has found that many sunscreens contain chemicals that can damage our oceans’ precious coral reefs. Chemicals such as parabens and microplastics (found in sunscreens containing “exfoliating beads” or similar substances) can irreparably harm marine life.

Fortunately, according to Save the Reef, there are plenty of sunscreen brands that are both highly effective in protecting your skin, while also causing no harm to coral reefs. Sunscreens with active UV-protective ingredients such as titanium and zinc, for example, are often considered “coral reef friendly”.

When you are packing for your beach holidays this year, make sure to research the brand of sunscreen you buy. A little thought and research will help to lower your effects on the surrounding wildlife when you take to the waves for a refreshing dip in the ocean.

By making these small lifestyle changes to protect the world around you, you could reduce your negative impact on the environment, helping to preserve the natural world while you enjoy all life has to offer.

Between 18 and 26 June, both Alton town and the village of Chawton in Hampshire will be filled with bonnets, fans, dresses and books. Every year, Jane Austen Regency Week gives Britain’s keenest literature enthusiasts the chance to meet and discuss their favourite Austen classics.

A pioneer for women’s literature, having penned classics including Emma and Sense and Sensibility, Jane Austen’s novels have inspired generations of women with their wit and honesty.

Austen’s most famous work, Pride and Prejudice, could be considered ahead of its time in more ways than one. A tale of sisterhood, love and money, Pride and Prejudice explores the lives of the Bennets: a lower-middle class family with five daughters all searching for a husband to save them from financial ruin.

While in today’s world women have far more power and agency over their lives than that of Austen’s Bennet sisters, there remain key issues that affect women’s financial stability in 2022.

Sometimes, turning back through seminal texts of the past can give us a fresh perspective on our current circumstances. So, here are three things Jane Austen’s Pride and Prejudice can teach you about financial empowerment for women.

1. Financial protection is vital for women – but many do not have it

One of the most pertinent themes of Austen’s Pride and Prejudice is financial protection for women. Indeed, many of the female characters in the novel seek marriage for exactly that: a comfortable home and the avoidance of poverty.

One such character is Charlotte Lucas, a friend of the Bennet sisters. Austen writes that for Lucas, marriage “was the only honourable provision for well-educated young women of small fortune, and must be their pleasantest preservative from want. This preservative she had now obtained; and at the age of twenty-seven, she felt all the good luck of it.”

In today’s world, our financial protection needs are very different to those of Austen’s women. While women no longer need a man to provide them with financial comfort or protection, this does not mean women are immune to financial shocks.

Studies show that there remains a significant protection gap between men and women in the UK. For example, research published by Money Marketing suggests that women are 44% less likely to take out income protection insurance than men.

Financial protection could help you: continue paying your mortgage if you became ill; give your children a substantial inheritance if you were to pass away suddenly; and stop you from dipping into your savings if you were unable to work for a long time.

2. Planning early for later life is crucial for all women

In the late 19th century, women’s later-life planning was stark yet simple: find a wealthy husband, at a young age, who can keep you safe and comfortable for the rest of your life.

For the Bennet sisters in Pride and Prejudice, this sentiment certainly rings true.

Austen writes, “Mr. Bennet’s property consisted almost entirely in an estate of two thousand a year, which, unfortunately for his daughters, was entailed, in default of heirs male, on a distant relation.”

While women’s futures depended entirely on men and marriage in those days, things are different now. Women are able to choose a path that suits them, earn their own money, and create their own unique plans for when they decide to retire.

However, one element of later-life planning that has not changed since Austen’s time is that it is crucial for women to start this process as early as possible.

According to UK insurer Aviva, the gender pensions gap is more than twice as wide as the UK’s gender pay gap, and can leave many women vulnerable to financial hardship when they reach later life.

This research states that, while the gender pay gap is estimated to sit at 15% in 2022, the gender pensions gap is as wide as 40.3%. This amounts to an average of £7,500 less in annual pension income for women.

Although times have changed hugely, women in 2022 could take a leaf out of Austen’s book when it comes to planning for retirement early.

By making a pension strategy with a financial planner as early as possible, women can begin building a solid foundation for their future, helping to avoid retiring with much less in their pension pot than their male peers.

3. Marriage can be a financial allegiance, not just an emotional one

While two of the Bennet sisters in Austen’s novel find happiness in marriage, many marriages of the time were financial allegiances, rather than emotional ones.

Of course, the days of marrying purely for financial reasons are long gone. However, women can still benefit from open and honest conversations with their spouse, helping both parties to “stay on the same team” when it comes to their money.

Indeed, a study by Royal London claims that 62% of couples say the main cause of arguments between them is money. Unlike the days of Austen, women and men should have an equal say in how their money is managed within a marriage. By discussing money openly with their spouse, women could find themselves feeling more financially empowered.

In fact, according to BBC Life, more than one-quarter of main household breadwinners in the UK are women. Unlike the financially one-sided days of Jane Austen, today’s women have ample opportunities to be both financially successful and independent, no matter their marital situation.

This increasing financial success for women provides all the more reason for holistic conversations with your spouse about your collective goals for the future.

Your Bowmore financial planner can mediate these conversations if you wish, empowering you both to make bold, informed financial decisions. This allows you to approach your financial circumstances as equals and form a tighter bond as you continue to make choices about your wealth together.

Get in touch

In the modern world, women should feel nothing less than empowered when it comes to money. We help female clients and married couples put plans in place for a prosperous future.

Email enquiries@bowmorefp.com or call us on 01275 462 469.

Please note

Bowmore Financial Planning Ltd is authorised and regulated by the FCA.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The tax treatment of certain products depends on the individual circumstances of each client and may be subject to change in the future.

Bowmore Financial Planning Ltd is not regulated to provide tax advice.

Losing your spouse or partner is one of the most difficult things to face in life.

The emotional aspect of dealing with a bereavement can be devastating and you may find thinking about the practicalities of what to do next stressful and overwhelming.

While money is the last thing you want to think about, it is not something you can put off forever and you might not be able to delegate every task necessary to someone else. If you are struggling to know where to start, it can be useful to seek professional advice.

This article includes some practical things you will need to do, along with some suggestions to help you cope with the upheaval.

1. Look after yourself and enlist help if you need it

This is perhaps one of the most vulnerable times in your life. Waves of grief can hit at any moment, adding to the challenge of taking care of finances. So, enlist someone you trust to help, maybe a relative or a close friend.

As well as helping you to sort out the financial paperwork, ask them to sit in with you at any official meetings.

This is one of the times in your life when you are potentially vulnerable. Even if you have dealt with your financial planner or other professional advisers for years, having someone else present is often recommended for your own protection, as well as to help make sense of everything.

When you feel ready to sit down with a financial planner, you should make time to do so. However, it is essential that you only do this when you feel up to it.

Don’t feel pressured into making any big decisions. You can meet with your professional advisers as many times as you need to make the right choices.

2. Understand the estate

If you had Power of Attorney or managed your finances as a couple, you will probably have a clear picture of how the estate is put together.

Alternatively, your partner may have been organised and left you with a folder or filing cabinet with all the information you will need to look after the estate.

If not, don’t worry. Take time to check through any paperwork for details of who they dealt with for banking and other matters. A starting point could be a debit or credit card in their purse or wallet, a bank statement, a utility bill or even a memory of going to a certain bank or building society.

3. Focus on the most pressing, routine financial decisions

There is no need to tackle everything in one go. Instead, try to schedule a small chunk of time each day to devote to urgent financial tasks. Completing one task a day will give you a semblance of order and can be empowering.

Don’t expect too much of yourself. Just focus on immediate needs, claim benefits and pensions, settle the estate, pay any taxes and work out what cash flow you will need going forward.

4. Be sure the bills are paid

Make bills a priority, otherwise you could face late payment fees or even debt collection for missed payments if you let things wait too long.

First, get on top of the household bills. Gather all the bills and make a note of how much is due and when they must be paid. Then check your bank account(s) to make sure you have enough money to cover everything.

If you decide to keep the joint account, any bills paid by direct debit from your joint account can continue as normal.

Bills that were paid from your partner’s individual account, however, might not get paid. This is because the account will probably be frozen once the bank learns of the account holder’s death.

You will need to contact the companies to change the payment details so that the money is taken from your account instead.

For bills that will continue to arrive, you will need to change any that were solely in your partner’s name to your name. Any bills that were in both names you can switch to your name only, but there is no rush to decide or act on this in the short term.

5. Transfer your joint bank account to an individual account

If you had a joint bank account with your partner, you can continue to use it as normal.

When you are ready, you will need to tell the bank or building society that your partner has died, so that they can amend the account details.

Alternatively, you might want to change it into an individual account in your name. Doing this may make it easier to manage your money.

6. Draw up a new budget

It is likely that your household income will change or possibly even drop when your partner dies.

With your household bills organised, you should have some vision of your regular monthly outgoings. So, you have already made the first steps towards drawing up a new budget.

Next, you need to add up all your regular income. This could come from benefits, a pension, wages, investment income or even savings.

If you end up with income left over after you have paid the bills, you might want to consider saving to build an emergency fund.

Should you already have an emergency fund, consider putting any additional money into a high- interest savings account. That way, it can earn some interest while you are still grieving. You can decide how to invest or spend any extra cash when you are ready.

7. Don’t rush into any big decisions

It is very important, in those first few months, that you avoid making any big decisions until you feel able to.

There is no need to rush into making big life changes. You may think you want to sell your house and move somewhere smaller or invest a life insurance pay out in a new property, but these life-changing decisions can wait.

Most financial planners would suggest you wait to invest lump sum insurance or pension pay outs for at least six months or longer.

Also, watch out for unscrupulous people trying to get you to invest with them, too. There will always be unsavoury characters who prey on the vulnerable, so exercise extreme caution if anyone approaches you with business or investment “opportunities”.

Get in touch

When you are ready, you might wish to re-establish your goals and objectives, as well as other needs, charitable giving and any gifting you may wish to do. Just remember not to rush anything.

If you wish to speak to one of our financial planners for help in organising your finances or any other aspects of financial planning, we are here to help however we can. Get in touch by emailing enquiries@bowmorefp.com or call us on 01275 462 469.

This article is for information only. Please do not act based on anything you might read in this article.

Bowmore Financial Planning Ltd is authorised and regulated by the FCA.

Even though it has been more than 50 years since the Equal Pay Act was passed by the government, the gender pay gap has not fully closed. According to data from the Office for National Statistics (ONS), as of April 2021, women in the UK are still being paid around 7.9% less than men.

While there have been great strides in gender equality in the past few decades, the pay gap still poses a significant problem for women. This is especially true when it comes to retirement planning.

If you want to know what the gender gap could mean for you, read on to find out the three important ways it can affect your long-term plans.

1. The pay gap can make it harder for women to build wealth

As you might imagine, since women are, on average, paid less than men, it can make it more difficult for them to build their wealth. This can be a problem as it means you may progress towards your financial goals more slowly.

Given that pensions are normally paid as a percentage of your earnings and women earn less on average, their contributions will subsequently also be lower. This can mean it takes them longer than men to build an equivalent amount of wealth.

Another factor that contributes to this is that many women choose to take time off work to raise a family. According to data published by the BBC, more than 15% of British mothers are economically inactive, compared to only 1.9% of fathers.

While raising a child is an incredibly rewarding task, taking time off work can mean you are not able to grow your wealth as effectively. Not only are you missing out on earnings, but also on the lost growth on those earnings over several decades.

Women can accumulate a lot less wealth than men in the same job. According to a report by Scottish Widows, this can mean that a 20-year-old woman could have £100,000 less in her pension when she comes to retire than a man.

2. Women may have to retire later than they would like

Since the pay gap means women are not able to build wealth as effectively as men, it can sometimes be difficult for them to retire early.

This is obviously a problem as, after a life of hard work, the last thing you want is to have to worry about not having enough money to retire. While delaying your retirement could give you more security, this option is not ideal.

According to a survey of over-55s published by Money Marketing, 32% of male participants said they had a secure financial foundation to retire on. Yet only 16% of females could say the same.

The report also noted that most women who retired early did so not because they had accumulated enough wealth, but because of ill health or caring responsibilities.

Another factor that feeds into this is that women also tend to live longer than men. According to data from the ONS, the life expectancy for a woman is almost four years longer than a man. This means that their wealth may need to last much longer.

On top of this, divorce also plays a significant role in creating this wealth disparity. As we discussed in a previous article, when assets are split during divorce settlements, many women opt to keep the family home and let their ex-spouse keep the pension pot.

While keeping the house can be beneficial in the short term, this choice has long-term implications. By the time they reach retirement age, women may have a significantly smaller pension pot, meaning they may not be able to afford their desired lifestyle.

If you are concerned that you will not have enough wealth to last you throughout retirement, you might be tempted to put it off for several more years.

3. Women may have to settle for a less comfortable lifestyle in retirement than they want

Retirement is traditionally seen as a time to sit back, relax and enjoy the rewards of your hard work. You have probably already thought about how you would like to spend it, from mastering your hobbies to taking long foreign holidays.

Of course, if you want to be able to enjoy your retirement to the fullest, it is important to know that you have enough wealth to live a sustainable lifestyle for the duration. Not having to worry about running out of money can be a huge weight off your mind.

However, since women earn less due to the gender pay gap, it can be much harder to attain this level of financial security. As such, if you cannot grow your wealth as effectively, you may have to settle for a less comfortable retirement than you would like.

On top of this, you may also have more concerns about money, which can seriously affect your enjoyment of this important chapter of your life.

If you want to take control of your finances and avoid the pitfalls of the gender pay gap affecting your long-term plans, professional advice can help.

Working with a financial planner can help you to grow your wealth more effectively through sensible investing. A financial plan built around your lifestyle and long-term goals can enable you to overcome the gender pay gap and enjoy the retirement you want.

Get in touch

If you want to know more about how we can help you to grow your wealth more effectively, get in touch. Email enquiries@bowmorefp.com or call us on 01275 462 469.

Please note:

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

Bowmore Financial Planning Ltd is authorised and regulated by the FCA.

The pandemic has reshaped employment and left many – particularly older workers – rethinking what’s important.

You may well be reconsidering your current employment situation, wondering whether you can find a new role that’s more suited to you.

But, once you’re aged 50 or over, it can suddenly feel like a very different task. There are a range of concerns and pressures that change the way you might approach it at this age, from financial concerns to issues such as workplace ageism.

That’s why it’s important to think about these five key points if you want to make a career change over age 50.

1. Check you have an emergency budget

The first thing you need to consider is whether you have an emergency budget that can support you if you’re in a position where you can’t work.

Experts often recommend keeping three to six months’ worth of living expenses in an easy-access savings account just in case things don’t go as you planned.

Changing roles can be highly uncertain, especially if you leave your current role without knowing where you’re headed.

An emergency fund ensures that you and your family will have money to keep living your current lifestyle, even if you’re in a position where you’re unable to work.

2. Make sure a new role fits into your lifestyle

Once you’re confident that you can afford to make the switch to a new role in the short term, you can start looking at roles.

As well as thinking about practical concerns, such as salary and the specific requirements of a job role, you may want to consider whether the role will fit in with your desired lifestyle.

This will mean something different to everyone as your desired lifestyle will be personal to you. For example, you may want a role with fixed, consistent hours so that you’re able to see your family or keep socialising in a certain way.

Alternatively, you may be looking to change your schedule in some way. A new role could give you the extra freedom you need to focus on passion projects outside of work, or any similar endeavours that your current role doesn’t allow you the opportunity to explore.

Whatever your priorities, make sure a new role allows you to live the lifestyle you want.

3. Watch out for ageism

Ageism is an unfortunate but realistic possibility of making a career change at 50.

Under the Equality Act 2010, employers are legally prohibited from discriminating against workers based on age. However, just because it’s illegal, it doesn’t mean that it isn’t happening in one form or another.

Insurer SunLife’s 2019 Ageist Britain Report found that 40% of Brits say they’ve been subjected to ageism in their lives. And one in three Brits say they’ve experienced age discrimination in the workplace.

It’s important to be aware of ageist attitudes if you’re entering a new work environment aged 50 or over. Younger employees might disregard your opinions as archaic, while your superiors may overlook you for promotions.

This may not sound like the worst thing, but it could severely hamper your career or even ruin the enjoyment of finding a new role that you were excited about.

Consider raising these issues with potential employers and ask them about the policies they have in place to prevent ageist discrimination.

At the very least, this should give you an impression of how they view the importance of ageism in their workplace.

4. Consider developing new skills

Once you reach 50, you’re highly likely to be an expert in your field. But, just because you have more than 30 years of experience, it doesn’t mean there isn’t room for you to learn even more.

Find ways to upskill and improve your employability. You could consider a full qualification from an academic institution to show your dedication to your profession.

Alternatively, there are plenty of online courses you could take to develop new skills that might be useful to you in your role.

Potential employers will almost certainly find it an attractive quality that you’re willing to continue learning. It could also open the number of roles available to you with your expanded range of skills.

5. Work with a financial adviser

It’s often a good idea to consider working with a financial adviser or planner when considering life-changing decisions, such as switching roles.

While there are various elements to finding a new job, it’s ultimately a financial decision. An expert financial planner can give you personalised advice on whether a change is an affordable and prudent decision in your circumstances.

If your heart is set on moving into a different position, an adviser may also be able to help you find financial strategies that make sure you and your family are secure in case of an emergency.

Work with us

If you’re considering finding a better, more suitable role for you later in life, get in touch with us at Bowmore Financial Planning.

Our team of experienced planners can show you the financial impact that changing roles might have on you and your family and help you decide whether it’s the right choice for you.

Email enquiries@bowmorefp.com or call 01275 462 469 to speak to us.

Please note

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

Bowmore Financial Planning Ltd is authorised and regulated by the FCA

Pensions are one of the most popular ways to save for retirement in the UK.

The potential investment returns and government tax relief make them an effective way to put money aside for later life while you’re working. Your savings will, ideally, provide you with adequate income when you retire.

But do you know the value of your pension?

42% of us don’t know what our pensions are worth

According to research from Aviva, almost half of us (42%) don’t know the value of our accumulated pension pots.

In fact, people in the UK are almost as likely to know the value of their wardrobe (34%) as they are to know the value of their pension (38%).

Just over 2 in 5 people (42%) admitted they don’t know the value of their accumulated pension pots, and 60% don’t know how much their pension funds would generate in retirement income when they retire.

These numbers don’t improve with age. 67% of people aged 45 to 54 don’t know what income their pension might give them when they retire. And 69% of the women couldn’t say what their retirement income might be.

40% of us don’t know how much we should save for retirement

Aviva’s study also revealed that 40% of people don’t know how much they should save into a pension to afford the lifestyle they desire in retirement. This figure increases to almost half (49%) of 35- to 44-year-olds.

Ideally, everyone saving into a pension should have some awareness of the value of their pension and what income their pot is likely to generate when they stop working.

If you are among the 42% of people who don’t know what your pension savings are worth, now is a good time to find out.

Make sure you’re on track to meet your retirement goals

To stay on track to meet your retirement goals, you need to review your pension savings regularly.

Knowing where you’re at will help you estimate the income you can expect when you decide to retire. Plus, if you discover a shortfall in your savings, the earlier you know about it, the more time you’ll have to fix things.

Start by gathering the details for all your pensions, savings and investments you hold. Once you have a complete list, get up-to-date statements from each provider so you can understand exactly what money you have saved and how much money each holding might generate for your retirement.

A brief breakdown of retirement savings to consider

The State Pension

Start by getting your State Pension forecast from the government website. This will tell you how much you might expect to get, when you can start claiming it, and if it’s possible to increase it.

The full level of the State Pension is £185.15 a week (2022/23 tax year), providing an annual income of £9,627.80.

Check for gaps in your National Insurance contributions (NICs), which, again, you can do on the government website. This will tell you if it’s possible to pay voluntary contributions and make up any gaps you have. This can help boost the amount of State Pension you receive.

Defined benefit or final salary pensions

Retirement income from these pensions is calculated based on your salary and the number of years you’ve been a member of the scheme.

Generally, they’re only public sector or older workplace pension schemes. If you’re a member of one of these schemes, the pension provider will usually send you an annual benefit statement. If you don’t have a recent statement, you can ask for one.

Your statement will show how much pension you might get. Be aware: it may quote an income amount based on you taking your 25% tax-free cash lump sum.

Defined contribution (DC) or money purchase pensions

These are the most common type of pension scheme. While you are working and contributing to this type of pension, you build up a pot of money that you can use for income when you retire.

The value of your pot is based on:

• Your contributions
• Your employer’s contributions (if applicable)
• Investment returns and tax relief.

DC schemes include workplace and personal pensions. Your annual statement will give you an estimate of your future pension fund value, as well as the estimated regular income you’re on track to generate for your retirement.

Other sources of retirement income

Of course, you might have other savings and investments that will provide an income for you in retirement. For example, ISAs, general investment accounts, or property you rent out. You should also be able to get statements for your investments.

Are all your funds invested to provide the potential returns you need?

Once you understand exactly what pensions and investments you have and know how much money they might generate when you retire, you should think about whether they are invested in the right way.

This may all feel like a lot to figure out. There may be too much admin for you to manage when you’re still working full time, and it may be tempting to put it off. But the longer you delay, the less time you have to address any shortfall you may uncover.

We can help you gather all the information you need. With your express permission, we can contact your pension and investment providers on your behalf and chase down the statements you need to get a clear picture of everything you hold.

Once you know what you have and how they are held, we can discuss whether you need to consolidate your pensions and investments to make them easier to keep track of. But, more importantly, we can assess whether the funds you are invested in are suited to your tolerance for risk and appropriate to deliver your desired retirement income.

Get in touch

If you want to consolidate all your pensions and investments and get a clear view of everything you have and what your savings are worth, we can help.

Our team of experienced planners will help you track down everything you have and show you what income your savings will generate when you retire.

Email enquiries@bowmorefp.com or call us on 01275 462 469.

Bowmore Financial Planning Ltd is authorised and regulated by the FCA