SIPPs or ISAs – which one is best for your retirement savings?

Woman at home with laptop, deep in thought looking out of the window

ISAs (Individual Savings Accounts) and SIPPs (self-invested personal pensions) both offer generous tax benefits to help you make the most of the money you save.

While the tax relief they provide is given at different times, there are several other differences that you’ll need to consider when deciding which tax wrapper is right for you.

Choosing the right savings vehicle for you will depend on your future goals

Of course, as long as you are over 18, depending on your savings goals, your circumstances, and how committed you are to saving for your future, you could have both.

If you’re an employee and thinking about taking out a SIPP, you may first want to consider whether you might be better off increasing contributions to your workplace pension scheme. A financial planner can help you understand whether contributing to a SIPP it the right option for you.

You may find that your employer will match your increased contribution. In effect, this may give you “free money” that you may decide to take advantage of instead of investing elsewhere.

Once you’ve settled on this decision, read on to learn more about the other criteria you should consider when weighing up whether a SIPP or ISA is best for you.

Using a SIPP for your retirement savings

Saving for your retirement through a SIPP offers tax relief advantages. You can also be selective about where your money is invested.

The freedom to choose your own investments gives you control over where and how you invest. This means you can tailor your SIPP savings to align with your financial goals and values.

You can hold a variety of assets in a SIPP. Along with cash, some of the most popular assets you can hold include investment funds, shares, and commercial property. Additionally, you can choose to hold funds in currencies other than pound sterling, including euros, US dollars and Australian dollars.

You can also make flexible contributions to suit your circumstances. This can be helpful if you’re self-employed, particularly if your income varies throughout the year.

In terms of tax benefits, you’ll get the same relief as you would with other pensions. For any contribution you make, the government will add a 20% boost in tax relief. This tax relief is added automatically, even if you don’t pay tax.

Usually, you can save up to £40,000 and you’ll receive tax relief on contributions up to this sum, but you can’t pay in more than you earn. If you happen to be a non-earner or earn below £3,600, you can contribute up to £2,880 and you’ll get tax relief on top, even if you don’t pay Income Tax.

As with other pension arrangements, if you’re a higher- or additional-rate taxpayer, you can claim an extra 20% to 25% through your tax return.

The money you save in a pension will also grow free from UK Income Tax and Capital Gains Tax (CGT).

When you save into a SIPP, as with any pension, your fund is intended for your retirement, so you shouldn’t expect to be able to take your money out again until you reach age 55 (this age limit is due to rise to 57 from 2028).

Once you reach retirement age and want to access your savings, you can typically take up to 25% of the fund in tax-free cash. All other payments from your SIPP will be subject to Income Tax.

Using a Stocks and Shares ISA may require more discipline

A Stocks and Shares ISA is another tax-efficient way to save for your retirement. As with a SIPP, you have the freedom to choose the investments that make up your ISA, allowing you to match your investments with your timescale, goals and appetite for risk.

In many ways, saving into an ISA can be less complicated since the tax benefits aren’t tied up with having to claim on your tax return. However, you’ll also miss out on the automatic 20% tax relief that the government adds to your contributions.

When you invest into an ISA your money will grow free from UK Income Tax and CGT. Plus, unlike a pension, everything you take out of an ISA is tax-free.

Unlike with a SIPP, you are limited to investing only £20,000 (in the 2021/2022 tax year). You can save the full £20,000 in one type of account or split the allowance across other types of ISA. For example, you may have a cash ISA and want to funnel some money into that account too. If you’re paying into different types of ISA, it’s important that you take care not to exceed the £20,000 annual limit.

A Stocks and Shares ISA provides great flexibility. Unlike a pension, you can make tax-free withdrawals whenever you like. However, if you’re saving into an ISA for your retirement, it is wise to keep your money invested until you need to draw on it for income when you retire.

SIPP vs ISA – going head-to-head


If you know you may be tempted to withdraw money, if given the opportunity, you may be wiser to remove the temptation and open a SIPP instead.Your personal circumstances and attitude toward long-term saving will play a large part in whether an ISA or a SIPP is more appropriate for you.

Alternatively, if you are keen to find a tax-free income stream when you retire, then an ISA is perhaps a better way to save for your future.

Of course, as mentioned earlier, there is absolutely nothing stopping you from saving into both an ISA and a SIPP and taking full advantage of all the flexibility and tax efficiency they offer.

Get in touch

If you would like expert help in saving for your retirement and would like to discuss your options, we can help. Email enquiries@bowmorefp.com or call us on 01275 462 469.

A Year In Review

It is often assumed that in a “bullish” year for equities most, if not all, markets will rise, with the acceptance that there may be some small divergence between the performance of the major markets, but that they will all generally perform well.  Equities behaved in this way through 2019 but then that correlation fell apart during 2020 and 2021.   Over the course of 2020, the FTSE was down 14.3% compared to the S&P 500 which increased 16.26%, a staggering 30% difference.  Then during 2021, the S&P again led the way, up 26.8%, but the Hang Seng Index this time (China) fell 14.1%, a 40% difference in performance.

It would be oversimplifying to blame inconsistent governmental Covid response alone for these major anomalies, although there can be no denying that the global pandemic has had the most significant part to play of any of the factors that have led to heightened volatility over the last 24 months. In reality though, the dispersion in returns between major world regions is more a function of idiosyncratic factors affecting individual stock-markets, some of which we will explore in this round-up of the year just gone.

January 2021 started well for equities, with a continuation of the rally in ‘value’ companies that started in November of 2020, after the election of Joe Biden and the announcement from Pfizer of a viable vaccine. The FTSE 100 started particularly well, outperforming the US and other major markets over the first few days of the year. The January 6th US Capitol insurrection and associated fallout then unsettled the markets until the end of the month, before a major market uplift started in February.

The structural rally in European and US equities was driven mainly by market expectations that the Covid pandemic would be brought under control with the rollout of vaccine programmes worldwide. As confidence grew in the unloved, Covid sensitive sectors of the previous year, (hotels, airlines, energy, financials), European, UK and US equities commenced a slow and measured rise. This positive economic outlook meant that volatility in the US markets subsided in 2021, with the S&P 500 posting just seven sessions where the index gained or lost over 2%. That compares to 44 sessions in 2020.

This positive economic outlook meant that volatility in the US markets subsided in 2021, with the S&P 500 posting just seven sessions where the index gained or lost over 2%. That compares to 44 sessions in 2020.

The main theme for the year, as lockdowns were lifted and the world awoke to a new “post-Covid” normal, was talk of escalating inflationary pressure.  A combination of extreme pent-up demand from frustrated consumers who couldn’t spend during 2020, supply shocks caused by pandemic disruption (not helped by the container ship Ever Given blocking the Suez Canal – you really couldn’t script it!) and continuing quantitative easing (QE) in the US until November 2021 all contributed to rising inflation around the world.  By year end, US inflation stood at a staggering 6.8% whilst in the UK, CPI was 5.1%.

Stock-market volatility fell dramatically in 2021

 

 

 

 

 

 

 

 

 

Source: Refinitiv

Inevitably, all eyes turned to the central banks to determine what these new aggressive inflation numbers would mean for interest rates.  There was a great deal of debate as to whether this new inflation was mainly transitory, caused by short-term supply shocks that would disappear soon enough, or structural, caused by increasing demand as the world re-opened.  The former, which was the stance of central banks for most of the year, should lead to no action on interest rates now whilst the latter would certainly call for higher interest rates now to cool inflation and to keep growth under control.

US inflation spiked to 6.8% by the end of 2021

 

 

 

 

 

 

 

 

 

Source: Refinitiv

The UK’s Monetary Policy Committee met on the 15th December and voted to increase interest rates by 0.15% to 0.25%, the first increase since July 2018. Yet during the same meeting the committee decided to also continue with their bond buying (QE) programme, softening the blow of hiking rates and signalling some uncertainty/caution as to whether they felt the recovery was sustainable.

The Federal Reserve (Fed) and The European Central Bank both elected to keep rates on hold in their December 2021 meetings.  The US economy is approaching full employment and considering the expectation that jobs numbers will improve further over the months ahead it was perhaps surprising that they did not act now to raise rates.  However, the Fed did halt new asset purchases (QE!) in November, a sign that they were preparing the market for rate hikes in 2022.

It would be dangerous to call the bottom of the interest rate cycle because Omicron could derail growth very quickly and therefore the major central banks are treading cautiously. However, it is now widely accepted that recent inflationary pressure has been driven by demand rather than supply, and markets now expect that US rates will be raised in two months’ time, for the first time since December 2018, and then twice more as we move through the year.

Until now, investors have taken all of this in their stride, which we found surprising because in the short-term markets don’t usually like talk of rising interest rates. This either means that there will be a short-term market drop when rates are finally raised in the US, or that there has been so much build-up to global rate rises that investors have already predicted this and factored it in.  We hope that the latter holds true!  Either way, inflation and the consequences for interest rates is the hottest topic as we enter 2022.

 

 

 

 

 

 

 

 

 

Source: Bloomberg

So, with inflation running high in developed market economies and stock-markets creeping steadily higher, why were these gains not mirrored in Asia, and particularly in China, which suffered double-digit declines in value over the course of the year?

As the world’s global manufacturing hub, Chinese GDP understandably suffered from the Covid related slide in global demand and was duly impacted more than many other economies.  By year-end GDP growth had slumped to 2.1%, having never fallen below 6% for the previous 30 years.

It was a miserable year for Chinese markets, lagging world markets by the biggest margin since 1998

Whilst Covid was a major contributor to this market decline, the wheels really came off over the summer, starting in late July, when the Chinese government announced a series of new regulations affecting various sectors.  The first of these was a ban on companies making profit from the education technology (‘EdTech’) sector.  Other reforms followed shortly afterwards, including (in order of date introduced) increased welfare for food industry delivery drivers, greater regulation of “pop-up” ads on apps, a crack-down on speculation in the computer chip industry, “unfair competition” legislation regarding the internet, tougher rules on the use of customer data and limits to children’s use of computer games, amongst many others. It felt like a sweeping range of reforms that had been planned for months as part of Xi Jinping’s new wave of societal ‘purification’.

Chinese GDP growth fell to 2.1% in 2021, having been consistently above 7%

 

 

 

 

 

 

 

 

 

 

 

 

Source: World Bank

These new laws feel idealistic and aspirational, and the speed and wide-ranging nature of the changes has been the envy of many western governments, however equity markets have been badly rocked by the news.  Whilst good for consumers and society, new regulation is seldom good news for investors and the severity of the changes and the autonomy that the Chinese government demonstrated with these announcements left the Chinese equity market badly affected.  The tech sector in particular took a hammering and led to a bear market in China (a fall of 20% or more) by the 20thAugust. In fact, from the February peak, Chinese equites had fallen by 40% by the end of August.

Then, to compound the problem, Chinese listed property company Evergrande, saddled with 570bn Yuan of debt, missed various debt payment deadlines, and cancelled a special dividend, citing liquidity issues.  All the while ratings agencies were steadily downgrading the company to junk status with talk rife of a “probable default” and unpaid salaries at various divisions of the conglomerate.  It was the last thing that the Chinese markets needed, the inference being that other property companies would follow Evergrande into the mire shortly and that there would be contagion into other sectors.

We wrote in detail about these issues in our August overview and do not wish to labour the point that China has experienced a catalogue of relatively unconnected woes that have directly impacted the Chinese equity markets this year, at a time when other equity markets have been performing well.

Japan (reflected by the Nikkei below) was the other market that performed relatively poorly in 2021. Japan had outperformed in 2020 due to Covid containment, but the Delta variant took hold last year and with at the time less than 5% of the Japanese population fully vaccinated (compared to over half the population in the US and UK already double jabbed), Japan struggled.

Initially, Japan’s vaccination rates severely lagged the other developed markets

 

 

 

 

 

 

 

 

 

 

 

 

Source: CLSA, John Hopkins University, IMF

As a result of these low vaccination rates the Government introduced a state of emergency in Japan in April, and this was not lifted across the predominance of the country until September. Under the state of emergency economic growth slowed markedly, as people were urged to refrain from non-essential outings and to avoid going to crowded places, while restaurants and bars were asked to close by 8 p.m. and were unable to serve alcohol.

This coupled with criticism of the handling of the situation in the run up to the Olympics led to some major political changes, most notably the resignation of Yoshihide Suga, the Prime Minister who had replaced Shinzo Abe just a year previously.

Japanese markets were down 2% by mid-August when developed markets were up an average of 15%.  Since then, the Japanese market has kept pace with most developed market peers, due in part to the appointment of Fumio Kishida to replace Suga as Prime Minister and a rapid rollout of the vaccine, with nearly 80% of the population now double jabbed.

China and Japan were the only two (admittedly large) blots on an otherwise immaculate copy book, dragging down the average return from equities considerably.  In general, however the strong performance from UK, US and European equities meant that equity markets as a whole performed well during 2021.

BUT WHAT ABOUT OTHER ASSET CLASSES?

Bonds had their worst year since 1999.  The Barclays Global Aggregate bond index, which is a basket of corporate and government debt worth $68tn, fell by 4.8% over the year, driven by major declines in US Treasuries and other government bonds.  The 10-Year US Treasury yield rose from 1.1% to 1.5% over the year as investors sold bonds aggressively, with the prospect of higher inflation and rising interest rates driving the declines over the period.

It was the worst year for bonds since 1999

 

 

 

 

 

 

 

 

 

Source: Bloomberg

Rising inflation is usually a bad sign for bond markets and cash, due to the fear of real capital erosion caused by rising prices.  Whilst it may be too early to call the end of the 40-year bull market in bonds with absolute certainty, if inflation persists conventional bonds will continue to struggle in 2022.

Commodities typically perform well during periods of high inflation and last year was no exception.  Lithium, crude oil, coffee and copper all had a stellar year, rallying hard in 2021 as the world economy opened-up again in March triggering aggressive demand for raw materials. The so called ‘reflation trade’ where investors aggressively buy cyclical sectors that recover well after a period of economic shock certainly helped commodities steal the show in 2021. However, gold had a miserable year, falling 4% as investors flocked to risk assets like equities and away from perceived safe havens.  Concern remains about the oil price, which rose by 50% over the course of the year and which, at $80 a barrel, represents a risk of higher inflation still for those economies such as India that are large net importers of oil.

The UK commercial property sector saw growth of 3.8% in Q3 of 2021, the highest quarterly growth rate since Q1 2010. The recovery in the sector was, like commodities, triggered by ‘reflation’ as the pandemic abated.  Challenges remain around the structural shift in the office sector as a result of flexible working but generally the outlook is now far more promising, even with the Omicron variant sparking short-term concern about possible lockdowns in 2022.

Other points of interest during the year included the David vs Goliath battle for Gamestop, where retail investors’ posts on the Reddit online forum resulted in the share price rising by 700%, wounding many big hedge funds which had shorted the stock.  Also, Cryptomania continued with the combined value of Bitcoin, Ethereum and Solano reaching $3tn over the summer.  It was also a record year for mergers, with M&A activity jumping 63% to $5.3tn over the year.  Global food prices hit 10-year highs and big tech became even bigger, with Apple, Google, Microsoft, Nvidia and Tesla accounting for more than a third of the S&P 500’s total return.

SO, WHAT’S IN STORE FOR INVESTORS OVER 2022?

Covid is of course still relevant, and the human impact remains devastating, yet the markets have ultimately shrugged off Omicron and have treated the virus as yesterday’s news. It would take a big negative shift in sentiment for the pandemic to have a material impact on markets this year.  Of far more importance to markets today is inflation and the pace of rising interest rates, and this will doubtless be the primary driver of volatility over the year ahead.

Over the last few years, investors have largely ignored traditional valuation metrics such as price to earnings ratios (P/Es), that have been used for decades to assess how expensive a company is relative to the market.  Yet with P/E ratios at record levels across many sectors, investors have still been piling into equities at increasing rates.  Why?  Partly due to the escalating interest in the tech sector – typically businesses which are very expensive when considering their current earnings – but which promise massive future earnings tomorrow, rendering their valuations today irrelevant. But this huge momentum with equities is also a function of fixed interest investments (bonds) looking increasingly bad value (and risky) in an environment of rising inflation.

Neither are good reasons to support increasing equity allocations strategically, but it is hard to argue with the weight of market sentiment in the short-term – equities remain one of the best means to beat inflation over the years ahead.

Whilst we remain positive about the outlook for equities generally, one trend to watch out for within equities is a strategic move away from ‘growth’ sectors like tech and towards ‘value’ sectors like energy and financials. If concern over the Omicron variant wanes further and interest rate rise expectations are brought forward, this will probably facilitate a greater move to ‘value’ companies at the expense of ‘growth’. Again, we have written about this concept at length in several past overviews and indeed, at the time of writing, we have started to see this trend developing already in 2022.  In any case, positioning portfolios to be more inflation-proofed in the current environment is definitely prudent.

Bowmore Asset Management Ltd is registered in England. Registered number 0905 1799. Authorised and regulated by the Financial Conduct Authority.

 

Duncan Harvey, Paraplanner gives insight into his role at Bowmore

I enjoy working in a countryside setting with the availability of scenic  walks available over a lunchtime, we have a farm shop and café within walking distance and a Parsons Bakery a stones throw away in Long Ashton.

I like to cycle to work to blow away the cobwebs in the morning, access via a cycle path is available for the commute, if you do come by car it’s a fairly quiet as the majority of traffic is headed into Bristol.

As a small team of paraplanners we share all of our work and are not allocated to an individual adviser – this is agreed and planned amongst the team during our meetings.

I feel that this collaborative approach helps each Paraplanner work to their strengths, but also allows for gradual exposure to products and services where they would like to gain greater knowledge and develop.

You can expect to work with both the Company Directors and their HNW client bank, as well as our Advisers providing them with the support they need to deliver solutions for clients with complex needs.

As a company we work in an environment of continuous improvement,  and you will be expected to put forward ideas for improvement in areas such as compliance, work flow, report writing and proposition. You will be given the opportunity to implement identified improvement projects and see them through to completion.

If you are seeking a role where you will be listened to, and given the time, tools and support to push yourself forward in your career this could be the place for you.

No more Mr Nice Guy

After a turbulent start to the year, US Stocks and bond prices dropped even lower on Wednesday afternoon after the chair of the Federal Reserve (Fed), Jay Powell, made it clear that the first increase to US interest rates since 2018 will be implemented at the Fed’s next meeting in March.  During the month of December, the annual pace of US consumer price inflation reached 7%. Powell had always said that if inflation got out of control, the Fed would be willing to bring in heavy weapons to knock prices down.

Last month, the Fed’s policymakers released projections that implied there would be three interest rate rises in 2022. In just one month this projection has been revised up, with potentially five rate rises this year now on the cards! In fairness, Jay Powell refused to rule out a more aggressive approach during 2022, adding that there was space to tighten monetary policy without harming the labour market.

In response to the hawkish speech from Powell on Wednesday, global equity markets went into risk-off mode. Having rallied ahead of the meeting, the S&P 500 closed marginally lower on the day, the US yield curve flattened and the Volatility Index spiked to its highest level since February 2021.

As Covid appears to be shifting towards a more endemic existence and supply chain bottlenecks look to be easing globally, we may well see inflation moderate. However, with US President Biden warning Ukraine of a possible invasion next month, escalating tensions at the Russia-Ukraine border could put pressure on already high commodity prices and keep inflation well above the Fed’s target.

As shown in the above chart, world equity markets are significantly lower today than they were at the beginning of the year and the familiar spectres of inflation, interest rates and Covid are likely to keep investors honest, with pockets of heightened volatility in the short term at least.

We believe portfolios are well equipped for this transitional period. They have avoided a significant part of the recent equity drawdowns due to positions in alternative assets (e.g., property, hedge funds, commodities) which are designed to diversify returns and help protect in times of stress, as well as significant exposure to the UK and more cyclical firms, which have outperformed on a relative basis. We continue to assess the markets and look to identify entry points for attractive opportunities, which can often present themselves during periods of volatility.

Bowmore Bulletin: Your latest update from the Bowmore team

Every month, we share some highlights of what’s been happening in and around the Bowmore Group. December was a busy month of charitable giving, so, this month we share three of the ways we’ve been giving back to the local community and the team.

Doing good in our Christmas jumpers

Throughout December we wore Christmas jumpers every Friday and raised £281 for Gympanzees.

Gympanzees support children and young people with disabilities in and around Bristol. The charity runs a lending library where families can loan specialist play and exercise equipment along with organising pop-up Gympanzees centres during holidays.

Visit the Gympanzees website to learn more about the brilliant work they do to improve the lives of young people in the area.

Donating food

As well as raising money for Gympanzees, we also collected food for a local foodbank. Everyone donated generously and we ended up delivering 78.22 kg of food to Nailsea Foodbank.

We received a lovely thank you letter and learned that, serendipitously, some of the items were things the foodbank had run out of that day. It was great to be able to make an immediate difference to local people in need and the foodbank is a cause we’ll continue to support.

Give and Take

Finally, we have implemented a new “Give and Take” annual leave policy.

From January 2022, each year every team member will have a “Give Day”, which they can use to volunteer their time to help a charity or community cause they care about.

In return, they get a “Take Day”, which they can take on or around their birthday, to spend extra quality time with their family, and help take care of their own wellbeing.

Coming soon… 7 books to add to your reading list before they arrive on screen

book and cup of coffee in hands of girl on winter evening near fireplace

If you’re a book lover, chances are you’ll have experienced a degree of anxiety about seeing your favourite novel adapted for the screen.

There’s no doubt that TV and film adaptations can be a contentious issue. From who plays your favourite character to decisions about detail missed in the re-telling, there’s a lot riding on whether you’ll love or hate the eventual outcome.

At the start of the new year, there’s a lot of new TV shows and movies to look forward to, so make sure you devour the delights of these seven brilliant books before they arrive on screen.

1. Where The Crawdads Sing by Delia Owens

With almost 150,000 five-star Amazon reviews, if you haven’t already discovered the magic within these pages, Where the Crawdads Sing should go straight to the top of your reading list.

Delia Owens’ debut novel tells the story of Kya, a young woman who is forced to raise herself in the North Carolina marshes when her family abandons her at the age of six. She grows up an outsider in her community, who ostracise and mistreat her, calling her “Marsh Girl” and “swamp trash”.

Despite having no formal education, Kya grows up to be wise and self-sufficient and makes a success of her life. But when she’s accused of murdering her former boyfriend, everything changes.

Actress-turned-producer, Reese Witherspoon is behind the project. So, if you’ve seen Big Little Lies or Little Fires Everywhere, which Witherspoon was also responsible for bringing to the screen, you’ll know this amazing book is in good hands.

The movie release date has been set for 24 June 2022.

2. The Wonder by Emma Donoghue

The Wonder is a tale of two strangers who transform each other’s lives, a psychological thriller, and a story of love pitted against evil.

Set in the Irish Midlands in the 1850s, Emma Donoghue’s novel tells the story of 11-year-old Anna O’Donnell and Lib Wright, a young English nurse tasked with watching Anna and uncovering the truth of how it seems the girl remains miraculously alive and well, even though she has stopped eating.

Starring Florence Pugh, who played Amy in the 2019 adaptation of Little Women, The Wonder is expected to air on Netflix in the second half of 2022.

3. Exciting Times by Naoise Dolan

When you leave Ireland aged 22 to spend your parents’ money, it’s called a gap year. When Ava leaves Ireland aged 22 to make her own money, she’s not sure what to call it, but it involves: a badly-paid job in Hong Kong, teaching English grammar to rich children; Julian, who likes to spend money on Ava and lets her move into his guest room; Edith, who Ava meets while Julian is out of town and actually listens to her when she talks; money, love, cynicism, unspoken feelings and unlikely connections.

Set against the backdrop of Brexit and the 2017 Hong Kong elections, Exciting Times is a bestselling debut and was longlisted for the Women’s Prize for Fiction in 2021.

The book has been adapted into a series starring Bridgerton star Phoebe Dynevor and is expected to air on Amazon Video in 2022.

4. Conversations With Friends by Sally Rooney

Conversations With Friends follows the adaptation of Rooney’s Normal People, which became a huge hit in the first lockdown and broke records as the most-streamed BBC series of 2020.

As with Normal People, Conversations With Friends will be directed by Lenny Abrahamson, who directed the film adaptation for Emma Donoghue’s heart-rending novel, Room.

Conversations With Friends is a BBC drama and expected to air on BBC and Hulu, hopefully sometime during 2022.

 

5. Foe by Ian Reid

Foe tells the story of Junior and Hen, a young married couple who live a solitary life on their farm.

The novel is set in the near future where environmental decay is destroying the planet. The couple are informed by a stranger that Junior has been selected to travel to a large, experimental space station orbiting Earth.

As for Hen, she won’t have a chance to miss him since arrangements have been made to ensure she’ll never be left alone.

Amazon Studios bought the rights in a deal worth more than $30 million.

Filming starts early this year in Australia and stars Saoirse Ronan, Paul Mescal, and Aaron Pierre. Director Garth Davis was behind Lion, a film that received six Oscar nominations, including Best Picture and became one of the highest-grossing Australian films ever.

Airing on Prime Video, the date is yet to be confirmed.

6. All the Light We Cannot See by Anthony Doerr

Anthony Doerr’s deeply moving novel tells the story of Marie-Laure, a blind teenager in occupied France during the second world war who meets up with a German soldier, Werner. The story follows Marie-Laure and Werner as they try to survive the devastation.

With more than 30,000 five-star reviews on Amazon, this New York Times bestseller won the 2015 Pulitzer Prize for Fiction and the 2015 Carnegie Medal for Excellence in Fiction.

The four-part series is expected to air on Netflix later this year, or early 2023, and is being helmed by Peaky Blinders adapter Steven Knight and Stranger Things director Shawn Levy.

 

7. Queenie by Candice Carty-Williams

Carty-Williams’ debut novel tells the story of Queenie Jenkins, a 25-year-old Jamaican British woman whose life starts to unravel when she takes a break from her long-term boyfriend.

Channel 4, who is behind the series, says, “Queenie is about heartbreak and bad dates and worse sex. It’s about south London and the gentrification that’s chipping away at it and what it represents. It’s about race, identity, culture and the politics that shape you. It’s about the love of friends, the chaos of family and community and all the other varying relationships in-between, but especially the one with yourself.”

Expect the TV series to be full of as much heart and soul as Queenie herself.

Due to air late 2022, if everything goes according to plan.

Love and money: 3 reasons you should do your financial planning as a couple

Happy middle-aged couple with laptop studying documents while working on couch at home

When it comes to discussing money, the most important person to talk to is your partner. Yet 25% of couples don’t find it an easy or comfortable subject and only 17% of people regularly talk about finances with their partner.

If you’re reluctant to talk money with your partner, you should probably rethink your reticence.

Even if you are in the early days of a new relationship, don’t be afraid to bring money into the conversation. Another study found that 40% of people find being financially responsible more appealing in a potential partner than their attractiveness.

Apart from financial responsibility being an attractive trait, if you’re in a relationship, your financial affairs are important to you both. So, it’s crucial to be open and honest, share information and plan your financial future together.

Here are three reasons you should manage your money as a couple and how you can benefit.

1. Decide on your financial plan together

Even if you and your partner have vastly different incomes, it’s useful to start by considering yourselves as equal when it comes to your financial plans. By starting out with the right mindset you’re less likely to find tension creeping into your conversation.

From buying a home together, choosing a car, and even deciding where you’ll go on your next holiday, the key financial decisions you’re making affect both of you. Plus, joint decisions often turn out to be better decisions.

While you may find that one of you usually takes the lead when making day-to-day decisions, such as paying bills or managing your household budget, this is often a case of which of you has the time or is better at doing the sums.

However, when you’re thinking about your overall financial planning strategy, it’s better if you both take an equal part in the decision-making. This way, even if one of you ends up handling the resulting paperwork and administration, you’ll know you both agree on the plan being executed.

2. Plan together and save money

There are various advantages to planning your savings, investments, and pensions with your partner. By planning together, you can benefit from tax incentives and allowances that you’re both entitled to.

Your annual ISA allowance

Each tax year you have an individual ISA allowance. ISAs allow you to save money and take the proceeds free from Income Tax or Capital Gains Tax (CGT).

In the 2021/22 tax year, the ISA allowance is £20,000. This means, as a couple, you can tax-efficiently save and invest up to £40,000.

Capital Gains Tax

The current annual exempt amount for CGT is £12,300 in the 2021/22 tax year.

By holding investments in joint names, you could take up to £24,600 worth of gains on eligible assets without having to pay CGT.

Pension contributions

The usual limit on tax-efficient pension contributions is either £40,000 gross, or 100% of your earnings – whichever is lower.

Because you receive tax relief at your marginal rate of tax, it often makes sense to maximise contributions for whichever of you is the higher earner.

However, if one of you isn’t working you can still contribute £2,880 into a pension each year and the government will top this up to £3,600 through basic-rate tax relief.

Marriage Allowance

If you’re married or in a civil relationship, you can use the Marriage Allowance to transfer £1,260 of your Personal Allowance to your husband, wife, or civil partner.

This means by planning together, you can reduce your tax bill by up to £252 a year.

3. Collaborate to achieve your life goals

Planning for your financial future together means you’re both invested in the same outcome. With a clear understanding of your joint income and expenditure, you can collaborate with your partner and plan to achieve your wider life goals.

No matter how you ultimately decide to spend your future or your money, it needs to work for you both. Discuss your goals and make plans together and you’re more likely to achieve the goals you’re both aiming for.

Get in touch

If you and your partner want to plan your finances in the most effective way, we can help. Email enquiries@bowmorefp.com or call us on 01275 462 469.

 

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

The value of your investment 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.

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.

Bumpy but bright – what will investors be watching closely in 2022?

Investor watching the change of stock market on tablet

Following two years of uncertainty, caused by the coronavirus pandemic and global lockdowns, 2022 is forecast to be a little bumpy, but also brighter.

Inflation is on the rise, as are interest rates, and continuing disruption to supply chains will create some stock market volatility. However, as the pandemic gradually moves towards an endemic, the hope is that consumer spending habits will normalise and economies will continue to strengthen.

Here’s what we’ll be watching in the coming months.

Pandemic pressures

The latest Omicron variant is yet to show how much it will impact the global economy. Although most expect its negative force to be short term, it will undoubtedly exacerbate supply chain disruption and this will have a knock-on effect on inflationary pressures.

On the other hand, eventually, we could see Omicron turn into a positive. Because it is proving highly contagious, so far the Omicron variant appears to be helping to disperse the more dangerous Delta strain.

Although cases are up, hospital admissions are not. The majority of those who have had Omicron have suffered relatively mild symptoms. The chart below, which shows the number of cases in London alone, is a helpful illustration of how this is playing out.

Source: Ft.com – data taken from the UK government Covid-19 dashboard.

Meanwhile, global vaccination programmes continue to roll out and the introduction of the Paxlovid pill should help to improve the odds of recovery for those who get seriously sick.

Optimists hope that the combined effect of the milder mutations, vaccination programmes and introduction of new treatments will help relieve pressure on the service economy and benefit the job market, which should help give asset prices a boost.

Inflationary pressures will play a key role in markets in 2022 and have forced the hands of monetary policymakers around the world

The main inflationary pressures have been caused by:

  • Surging demand as economies reopen
  • Labour and materials shortages
  • Higher energy prices, especially in Europe
  • Expansionary fiscal and monetary policies through the pandemic
  • Other factors caused by Covid-induced distortions.

These pressures are expected to ease during 2022, but certainly not disappear entirely. A major risk to this view is if these pressures more permanently affect wage negotiations, which could fuel more persistent price increases.

Although few are anticipating a return to 1970s-style stagflation, many expect inflation to remain elevated across developed markets. While inflationary pressures are likely to ease as supply chain issues gradually resolve, firms are split over how transitory inflation will be.

The biggest risk for markets lies with potential monetary easing missteps

Central banks will need to maintain a careful balance between keeping inflation expectations under control while allowing support for economic growth.

Inflationary pressures have put the focus on monetary policymakers, who will need to tread carefully in both implementing policy actions and how these are communicated. The hope is that central banks will resist overreacting and remain conscious of the risk of inflation feeding through into more persistent shifts in wage and price increases.

Interest rates in 2022

Money managers, investors and consumers will all be watching interest rates in 2022, because it’s these rates are the primary and most effective monetary tool available to policymakers to combat rising inflation.

Although higher interest rates typically mean that savers get more return on their cash, on the flip side it becomes more expensive to borrow. This means that some people will save more and spend less, which can help keep inflation in check.

In December 2021, the Bank of England (BoE) increased the base interest rate from 0.1% to 0.25%. This was the first time interest rates had been hiked in more than three years.

With UK inflation currently above 5% – its highest level in more than 10 years – and expected to reach 6% in April, gradual interest rate rises are likely in 2022.

Rocketing energy prices have added further fuel to the fire

Following lockdown in 2021, there was a surge in demand for energy. This helped to fuel inflation figures.

Soaring energy prices have seen almost 30 UK providers go out of business in the past year, causing consumers to see a sharp rise in their gas and electricity bills.

Unfortunately, this problem is unlikely to be short-lived.

According to Dr Craig Lowrey, a senior energy consultant at Cornwall Insight, “The continued increase in gas and electricity wholesale prices, [means] our forecast for the default tariff price cap has risen to approximately £1,800 per annum.”

With the current cap set at £1,277, which came into force in October 2020, this prediction is a rise of nearly £600. And Lowrey’s figures don’t take into account the spate of energy suppliers going out of business.

With concerns over energy supply availability for the coming winter and wider geopolitical issues that may affect gas European supplies, in particular, the wholesale markets are experiencing renewed volatility.

Supply chains are still playing catch up

Supply chains remain knotted up, and few would like to predict when this may resolve.

This chart, from the New York Fed, tells a graphic story of the pressure the global supply chain is under:

Source: New York Fed

While some supply constraints are starting to ease, most are still clogged up. Although some financial analysts expect a brutal 2022, in terms of supply and demand, others are anticipating some relief in the second half of the year.

Even the most optimistic financial experts aren’t expecting a full return to normal during 2022, although they do expect normalisation in certain specific sectors.

Use insight to inform decisions and invest for the long term

Recently, markets have been choppy to say the least. This is reflective of the fact many are still undecided on whether the darker days of the pandemic are now a thing of the past.

However, we believe we are in a transitionary phase. Investors are still grappling with certain aspects of the economic recovery as we gradually return towards something more like a pre-Covid environment.

In the short term, this means that certain investment styles can fall in and out of favour quickly, but it is important to remember that longer term trends don’t play out overnight.

The problems we have talked about here are global issues that have a knock-on effect on the world economy and stock market movements. This insight can be used to inform investment decisions.

The secret of success is to recognise and understand these key issues and consider the long-term prospects in light of these events, rather than make rash decisions based on short-term noise.

The most important thing to remember when you invest in the stock markets is that investing is a long game.

We are optimistic about return prospects in 2022 as we continue on the path of recovery and positive investor optimism starts to gather momentum. Needless to say, there will inevitably be a few speed bumps along the way.

While there’s no hard and fast rule about how long you should hold your investments, ideally you should consider five years the minimum. For the best chance of benefiting from long-term compound growth, you should expect to remain invested for 10 years or longer.

Get in touch

If you are interested in learning more about how you can profit from expert insight to maximise and grow your wealth during 2022, get in touch.

Email enquiries@bowmoream.com or call us on 0203 617 9206.

 

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

Past performance is not a guide to future performance.

Bowmore Asset Management Ltd is authorised and regulated by the FCA.

Do returns in January set the tone for the rest of the year?

Young man sitting by large window in a modern kitchen looking thoughtful as he reads important message on phone

The old stock market adage “As goes January, so goes the year” was first discussed in 1972 by Yale Hirsh, creator of the Stock Trader’s Almanac.

The idea is that if the first month of the year is positive, it bodes well for the rest of the year. If, however, January sees stock markets close at a loss this may signal a turbulent time ahead.

So, does the saying ring true, and should you take heed when making your investment decisions?

The adage suggests when markets fall during January, an investor might decide to sell on 31 January and remain out of the market until the following year.

Beware such wisdom

Analysis that an investor with £100 invested in the FTSE 100 on 1 January 1999 who followed this strategy and sold their stock would have missed valuable years of growth. If they repeated the same pattern of behaviour every January, their £100 investment would be worth £97.08 by the end of 2019. Giving them a loss of almost 3%.

Meanwhile, the FTSE 100 returned 28% for investors who remained fully invested over the same 20-year .

So, if the same investor had invested their £100 and remained invested no matter how the stock market behaved in January, their £100 would have been worth £128 at the end of 2019.

The charts below show the £100 invested and then taken out of the market, compared with a £5,000 investment during the same 20-year period.

£100 invested following the old stock market adage “so goes January so goes the year” would have returned -3% over a 20-year period. The chart shows the value of the investment at year-end.

Meanwhile, the FTSE 100 returned 28% over the same period: FTSE 100 index Dec-98 to Dec-19 

Source: Bowmore Asset Management

Remember, past performance is not an indicator of future performance. The value of investments can fall as well as rise.

Attempting to predict market movements can be extremely difficult. By investing with this mindset, you’re more likely to miss out on rebounds in stock prices, which often occur during periods of increased volatility.

For example, during the height of the 2008 financial crash, between April 2008 and March 2009, the FTSE 100 dropped by 38% but had rebounded by 41% before the end of 2009.

Trying to time market movements could erode the value of your capital

Time in the market is a far more successful strategy than trying to time the market.

As well as missing out on positive rebound growth, by attempting to time market movements you may also be exposed to the risk of inflation eroding the real-term value of your capital.

Money that is not invested in the stock market is less likely to keep pace with the rate of inflation, which leaves your capital exposed to being eroded in real terms.

Sudden market movements can be stressful and cause anxiety. This is one important reason to make sure you invest at a level of risk you are comfortable with. It is also crucial that you invest for the long term. Ideally, when you invest you should always be thinking beyond five years, preferably 10 or longer.

Investing with a long-term time horizon

Investing for a short-term gain is a dangerous and often unprofitable strategy. Markets are volatile and your funds are susceptible to short-term losses if you set short-term investment horizons.

Historically, over the longer-term markets have shown a strong tendency to trend upwards

As our investment manager Owen Moore says, “Riding out short-term ups and downs gives you the chance of accessing much better long-term returns.

“Trying to time the market is rarely the best way for building wealth. While short-term movements are inconsistent and largely dependent on changes in valuations and sentiment, long-term trends are much more predictable.”

Get in touch

Bowmore Asset Management specialise in building and managing investment portfolios for private clients, trusts and charities. We invest across all major asset classes including equities, fixed interest, hedge funds, commodities and property funds. Our primary objective is to help you achieve your investment goals.

To find out more about how we can help you invest your money wisely and how you can profit from expert insight and long-term growth, email enquiries@bowmoream.com or call us on 0203 617 9206.

 

Bowmore Asset Management Ltd is authorised and regulated by the FCA.

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

Past performance is not a guide to future performance.

4 important things to consider when planning your retirement budget

Retired couple managing budget and paperwork together

Whether you’re planning ahead in anticipation of a comfortable retirement or are already enjoying retired life, it’s important to have a good understanding of your finances.

When you’re no longer working for your income, having a budget is sensible planning. This is especially true as some expenses, such as medical and health insurance, are likely to increase.

Knowing what you have coming in and going out each month can also bring peace of mind, allowing you to relax and enjoy your retirement without worrying about money.

You’re likely to find a significant difference in your budget when you retire compared with when you’re working. So, here are four things you should consider when planning your retirement expenditure.

1. Your regular weekly spending habits

Calculating your essential household expenditure should come at the top of your list when planning for your retirement.

You might find that your regular outgoings begin to change in the years leading up to your retirement. If, for example, you finish paying off your mortgage or your children leave home, you may suddenly find yourself paying out less than you have in years.

Meanwhile, one of the outcomes of the pandemic is that many of us have saved money by working from home. The most significant saving for many of us is not having to commute. No longer paying for our habitual morning coffee or lunchtime sandwiches has also left us with extra money in our pockets.

To put this into perspective, according to ThinkMoney, the average cost of a regular latte in 2020 was £2.63. If you enjoyed a morning latte every weekday morning, you would spend just over £600 a year on your caffeine fix, taking into account your annual leave.

This is just one example of how small purchases can add up to large amounts over time.

As you’ve seen above, one of the useful things about working out your budget is to find out how much you’re spending on potentially unnecessary treats and whether you might be able to save that money or put it towards something else instead.

If you have been used to travelling to work in your car or have been commuting by train, you may also save on daily travel costs. Of course, this will depend on how you intend to spend your retirement, as you may end up taking longer trips more frequently. These may end up costing more than your previous daily commute.

Finally, consider how your household bills might alter when you retire. You’ll perhaps spend more time at home. This could mean running the heating more often and for longer periods and you’ll probably boil the kettle more or use the oven more frequently.

If you’re going to be at home more of the time this increase in electricity and gas will cause your monthly bills to rise and you’ll need to account for this.

2. Will you lose any high-value perks when you retire?

If you currently drive a company car or have private medical cover or life insurance through your employer, it’s important to factor in the cost of replacing these perks before you retire.

Depending on where you live and what your local transport links are like, you may decide you’re happy to do without a car, especially if your work involved a lot of time behind the wheel.

If you’re content to rely solely on the NHS, you may not be too worried about losing medical insurance, but make sure you know what you’re giving up and that you are satisfied to let go of your employee protection benefits.

Life insurance is one area you should probably make sure you have covered. Since this is one cost that increases with your age, the sooner you set up protection, the better.

3. How will your lifestyle choices change what and how you spend?

As you do your calculations, you may find you actually save money by not going to work. However, this won’t necessarily equate to having more disposable income if your retirement income is less than the salary you were earning.

Once you know how much you’ll need to cover your monthly essentials, how much will you need to live the life you want and have fun when you retire?

Whether you have grand plans to go on an adventure and see the world or want to move house and relocate to live closer to family, it’s important to work out how much you’ll need to meet your retirement dreams.

If you’re not sure how you intend to spend your time in retirement, now’s the time to start dreaming and planning.

Don’t be afraid to dream big. Once you have a plan in mind, calculate whether your retirement lifestyle will be more expensive than your working life. Make sure you’ll have enough to pay the bills with enough left over to live your dreams .

When it comes to planning for bigger expenses, such as luxury travel, you may find it useful to set out a timeline of what you want to do and when, so you can plan ahead for the increased expenditure you expect to incur.

In doing this, don’t forget to include the small lower cost treats and activities you expect to enjoy too. Things like more meals out, day trips, gym or club memberships all add up, so make sure they feature in your budget.

4. Important factors to remember when you’ve drawn up your retirement budget

When you’re budgeting for your retirement, you’ll also need to think about:

  • Your options for where and when to draw your retirement income
  • Optimising your tax allowances
  • How you’ll cover the costs of care later in life
  • Making plans to pass your wealth on to your family and loved ones.

With so much to take into account, it’s a good idea to talk things through with a financial planner a few years before you retire.

Speaking with someone who understands all elements of retirement planning can help you set out a sound strategy to fulfil all your objectives. Where necessary, a conversation early enough may allow crucial time to adapt your plans so you can enjoy the retirement you hope for.

Get in touch

If you’re approaching your retirement and would like help to organise your finances, please get in touch. Email enquiries@bowmorefp.com or call us on 01275 462 469.

 

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

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