At the beginning of October, Eldon welcomed Natasha Noble to join our paraplanning team.

Here is a short introduction from Natasha:

I graduated from Newcastle University in 2013 with a degree in Geography and started my career in financial services shortly after.

After spending 5 years in another firm where I achieved the Diploma in Financial Planning, I was drawn to the strong client focus and approach to holistic financial planning at Eldon.

I am currently working towards the Advanced Diploma in order to achieve Chartered Financial Planner status and look forward to developing my career as a Paraplanner further. I hope to gain valuable knowledge from my new colleagues and assist Eldon to continue to provide a first-class service.

During my first two weeks, I have been warmly welcomed to the team and have already had the pleasure of meeting some clients via Zoom!

Outside of work, I am a National Trust member and enjoy exploring sites around the North East. I am also an animal lover and enjoy walks with my family dog, although his advancing age now means he would much prefer to snooze. I also recently adopted a rescue cat who is settling in well, although I get the impression he thinks he has adopted us.

Against a backdrop of surging Coronavirus cases across the UK, and the introduction of further Government restrictions, the Chancellor of the Exchequer, Rishi Sunak, delivered his Winter Economy Plan on Thursday of last week. Sunak’s Plan is intended primarily to offer additional support to businesses and protect jobs over the last quarter of 2020 and into 2021. It comprises four main additions to the existing plan.

A New Job Support Scheme

This is to be introduced from 1st November and set to run for six months, during which time the Government will contribute towards the wages of employees that are working fewer than normal hours due to decreased demand. Whilst employers are to continue funding wages for the hours that are worked, the Government and employer will each pay one third of equivalent salary for the hours not worked. In order to qualify, employees must be working at least 33% of their typical hours, with the level of grant capped at £697.92 per month.

Extension of the Self Employment Income Support Scheme (SEISS) Grant

For those currently eligible for the SEISS Grant and continuing to trade but facing reduced demand, a further taxable grant will be available. This offers a lump sum of three months’ worth of profits from November to January 2021, equating to 20% of average monthly profits up to a maximum of £1,875.

A second grant is also set to be available for the self-employed to cover the period from February to the end of April 2021, although this is subject to change.

Temporary 15% VAT Cut

Sunak also announced that the 15% VAT cut is to be extended to the end of March 2021 for the tourism and hospitality sectors, the intention being that businesses within this sector feel able to retain staff as they adapt to the impact of the Coronavirus.

Furthermore, businesses that deferred their VAT bills will now be able to make payment in eleven instalments during the 2021/22 tax year, rather than an as one lump sum at the end of March 2021, under the New Payment Scheme.

Increased Flexibility for Business Loans

The introduction of a new ‘Pay As You Grow’ repayment system for Bounce Back Loans will see the extension of loan terms from six to ten years. In conjunction, businesses may be able to extend the length of Coronavirus Business Interruption Loans to ten years. Applications for such loans, and other Coronavirus loan schemes, will now remain open until the end of November.

It’s been a long time coming, after first being announced in 2014, but the government has just confirmed the minimum pension age increase from age 55 to 57.

The change will be effective from April 2028. This applies the rule of the minimum pension age being 10 years earlier than state pension. State pension age is due to increase to age 67 as from April 2028. Until 2028 you can access pension from age 55.

The change is said to reflect the trends in longevity and to encourage people to remain in work and save in their pensions for longer to provide a more sustainable retirement.

We believe that some earlier, scheme-specific, retirement ages may persist but as time goes on such exceptions will become fewer but it always worth checking your own pension scheme.

If you need guidance or advice on your pension and its accessibility or you are planning for your retirement please contact us and we’d be please to help.

Since the COVID-19 pandemic, the amount of government support has increased significantly. This has enabled individuals across the UK to remain employed through the furlough scheme and the self-employed to continue funding their living without taking on personal debt. However, these are only two of the schemes put in place to boost the economy.

Government Borrowing

This begs the question, which many people have already asked; “How do we pay for this support”? The answer is government borrowing in the form of UK GILTS. The government are effectively borrowing money from various sources, for which they will pay annual interest like any other loan and repay in full at a later date.

This type of government borrowing isn’t unusual as a type of fiscal policy to boost the economy. However, recent figures have shown the effect COVID-19 has had on the level of borrowing. Between April and July 2020 c£150.5 billion was borrowed. This is almost three times the total borrowed in the financial year 2019/2020.

Although this is the case, the rate of interest on the borrowing is very low. One example shows the government will only pay 0.125% pa on a GILT which does not need to be repaid until 2028. For one repayable in 2050 the rate is a little higher but still low at 0.625% pa. The key is that although the level of debt has significantly increased, the cost of the debt is very low. If inflation averaged just 2% pa between now and 2050 the cost in today’s terms of repaying the debt is nearly halved in today’s terms.

Looking Forward

The effect of this level of borrowing is unknown at this stage, but it is clear that the government wants the economy back to normal as soon as possible. Typically, the rate of inflation increases because of increased government borrowing but given the reduction in economic demand has been so severe, it is thought inflation could remain low for an extended period.

For investors within equities it could be good news, as typically when interest rates on fixed interest (GILTS) and cash are low, it makes the equity market more attractive leading to potential increases in value.

As ever should you have any questions or concerns about your investments please don’t hesitate to contact us.

Inflows

Many people will now be familiar with Ethical/Environment, Social & Governance (ESG) investing as this is becoming an ever more prominent area, but just how much has this area grown recently?

2019 saw record inflows for ESG funds. This was the case both in the UK and in the US. Previously the investment options in this area were far more limited, usually with a typical “Ethical” fund being offered only. With many more offerings in the market, investors can now invest in a far greater range of funds, which can align more closely with their own views and morals. This has broadened the appeal of ESG funds. An added benefit of this increased competition is that it has driven costs down in funds to a far more competitive level when compared with non-ESG funds.

Indeed, this trend has continued, with July seeing record monthly inflows into ESG funds in the UK. The graph below highlights just how the ESG Equity fund inflows have exploded showing that from 2019 onwards inflows really took hold.

Performance

One misconception is that investing in an ESG fund means giving up on returns. Academic research is divided on the issue, with some arguing that a company demonstrating good ESG behaviours will outperform those that do not, as better governance is often correlated with companies who are deemed to be higher quality. Others argue that the additional costs involved in meeting ESG compliance will outweigh the benefit and be a hindrance to the performance of the company.

One “benefit” has been the lack of Oil holdings in ESG funds. This has been an area of poor performance. In addition, Technology holdings often feature quite prominently in ESG funds, which has been a sector that has outperformed lately.

If we look at the data, this backs up the thesis of ESG funds outperforming. Data published by Morningstar has examined the long-term performance of a sample of 745 European based sustainable funds. The results showed that most strategies have done better than non-ESG funds over 1, 3, 5 and 10 years. As ESG funds are still relatively new, performance data only goes back 10 years with a big enough sample range, however the findings do seem to debunk the myth that investing in ESG funds carries a performance cost.

Looking Ahead

The growth in ESG funds is projected to continue, with a report from Deloitte estimating that ESG mandated assets in the US could grow at 3x the rate of non-ESG mandated assets up to 2025.

In addition, from 10th March 2021 the EU directive on Sustainability-Related Disclosures will take effect. This aims to enhance transparency regarding the integration of environmental, social and governance matters. This will apply to the UK also, despite the withdrawal from the EU. This will give investors a clear benchmark for comparison between funds.

Despite the outperformance of ESG funds over recent times, there is no guarantee this will continue. Investors should move into ESG funds not based on performance, but to ensure their investments are aligned with their own views. As we often say, past performance is no indicator of future performance.

The UK government has introduced temporarily reduced rates on Stamp Duty Land Tax (SDLT), but what does this mean for you?

SDLT applies on the purchase of land or residential property in England or Northern Ireland. Similar taxes apply in Scotland (Land & Buildings Transaction Tax) and Wales (Land Transaction Tax), but the rates and thresholds are set by the Scottish and Welsh Governments.

As well as the reduction in SDLT in England and Northern Ireland, the equivalent taxes in Wales and Scotland have also been reduced temporarily. These reduced rates will be in place until 31 March 2021.

If you are not likely to complete the sale or purchase of a property before 31 March 2021, these short term changes are unlikely to affect you.

If you are purchasing land or property within this time frame, then this is how the taxation will differ for you:

England & Northern Ireland – If you purchase a residential property between 8 July 2020 to 31 March 2021, you only start to pay SDLT on the amount that you pay for the property above £500,000. Transactions involving an additional dwelling will continue to attract a 3% surcharge on the full purchase price.

Scotland – You now only start to pay Land & Buildings Transaction Tax on purchases above £250,000 rather than £145,000. Transactions involving an additional dwelling will continue to attract a 4% surcharge on the full purchase price.

Wales – The starting threshold for Land Transaction Tax will increase from £180,000 to £250,000 for the residential main rates. Transactions involving an additional dwelling will continue to attract a 3% surcharge on the full purchase price.

More information can be found on government websites for each country.

Following the announcement of Chancellor Rishi Sunak’s Summer Statement on the 8th July, the Prime Minister appeared to solidify proposals for a ‘greener’ economic recovery in an announcement on Wednesday 22nd July.

In addition to Sunak’s introduction of £3billion worth of grants for more energy-efficient public buildings and homes, PM Johnson has committed around £350million to cutting heavy industry emissions in a bid to tackle climate change. The investment package will also be aimed at the decarbonisation of the construction, aerospace, aviation, and transport sectors, forming part of the Government’s overarching plan to reach net zero emissions by 2050. Wednesday also saw the first meeting of the Jet Zero Council, bringing together government representatives of the aerospace and aviation sectors to draw plans for tackling the carbon footprint of flights.

What’s in the box?

1 – Johnson’s investment package includes £139million designated to the transition from natural gas to cleaner hydrogen energy amongst heavy industry, as well as ongoing research into technology designed to prevent the outward release of industrial emissions.

2 – A further £149million has been committed to 13 ‘initial projects’, including the development of recyclable steel.

3 – £26million has been attributed to the reduction of build costs and emissions in the construction industry. An additional £10million has been allocated to 19 construction projects, including research into reusable roofs.

4 – The package details the launch of a New National Space Innovation Programme, backed by £15million UK Space Agency funding. Initial projects are set to focus on monitoring global climate change and extreme weather.

5 – A final £10million has been committed to the automotive sector and development of electric vehicle projects.

Too little too late, or a beneficial first step?

The response to announcements by both the Chancellor and Prime Minister has understandably been mixed, with some welcoming any stimulus package intended to tackle both environmental and economic issues. However, campaign group ‘Plan B’ has launched a legal challenge against the Government’s plans, stating that they are ‘clearly unlawful’. Members of such groups have argued that the PM’s investment is merely dwarfed by billions previously committed to airline industries and the use of fossil fuels: a ‘fig leaf for the Government’s new deal for polluters’, as branded by the group’s director, Tim Crosland.

On Wednesday 8th July, Chancellor Rishi Sunak provided his economic plan in response to the COVID-19 pandemic. The Summer Statement has been introduced on this occasion to help the UK economy recover following recent events.

We have summarised below the main points from the statement:

Job Retention Bonus

For every furloughed employee that an employer retains until the end of January 2021, the government will provide a one-off payment of £1,000. The bonus scheme applies to workers earning over £520 per month on average between November and the beginning of 2021.

If the nine million employees who have been furloughed this year return to work under the scheme, it could cost the government up to £9 billion, to retain people in work. It is highly unlikely all will be taken back but it does provide an incentive to businesses to take this step.

Leisure and Hospitality

The Chancellor announced that from 15th July to January 2021, the rate of VAT for selected areas across hospitality, will reduce from 20% to 5%.

To also encourage spending in businesses across the sector he has offered the “Eat Out to Help Out” scheme offering 50% discount for every diner. The scheme will offer up to £10 discount when dining from Monday to Wednesday throughout August, covering the food bill and non-alcoholic drinks.

Residential Property

The housing market has been put on hold over the past six months due to the pandemic and to prevent this continuing Mr Sunak has introduced a Stamp Duty holiday. This increases the threshold for stamp duty on residential property in England and Northern Ireland from £125,000 to £500,000. The measure applies to house purchases taking place from 8th July 2020 to 31st March 2021 and it is expected that nine out of ten transactions would be tax-free, due to the this.

Although this is the case, the additional 3% stamp duty for individuals purchasing a second residential property will still apply throughout the period.

For existing house owners, the ‘Green Homes Grant’ will be available from September this year, meaning households could receive vouchers of up to £5,000 for home projects that increase the energy efficiency of their home in England.

For low income households the government will increase the voucher amount, up to £10,000.

Employment for Young Workers

The Chancellor has introduced a vast range of initiatives to encourage employees to take on new workers and specifically aiming at the younger generation, aged between 16 and 24. The ‘Kickstart Scheme’ includes a £2billion fund to pay for six-month work placements for 16 to 24 year olds who are currently on Universal Credit. Over the six-month period, he hopes that employees will provide the necessary training to allow the individuals a good start in employment.

The government is also offering employers a £1,000 grant per trainee aged between 16 and 24, £2,000 per apprentice aged under 25 and £1,500 per apprentice aged over 25.

Infrastructure and Decarbonisation

The government is providing grants of £1billion to public sector bodies to improve energy efficiency and also £50million towards a social house decarbonisation fund.

One of the most common phrases heard from retirees is ‘I don’t know how I had time to work before’. Indeed many people find they are busier than ever during retirement, but just how important is it to fill your time throughout retirement, and what are the common things people do?

Holidays/Travel

Although everyone is different and have different aspirations, one of the common things we see is increased travel and holidays for retirees, however this will not keep you busy day to day. Humans, by their nature, thrive with a routine, so having some form of daily routine will be beneficial to overall health.

This isn’t to say that holidays/travel should not be an aspiration, as often a goal or something to look forward to outside of a daily routine is just as important. This provides a break from ‘normal life’

Companionship

One big issue for retirees can be loneliness. Once the novelty of escaping the 9-5 job has worn off, people can often miss the social network that this brought. Indeed, studies have shown that without any adequate social interaction, people are twice as likely to die prematurely, with effect on mortality being comparable to that of smoking.

People often get a dog, that was not possible previously whilst working. Owning a dog can provide companionship and combat loneliness, but is also a great way to get outdoors and socialise with others.

Retiring also provides people with a lot more free time to simply spend with their family if they wish. Watching grandchildren grow up can be extremely rewarding for many and you can help with babysitting too!

Hobbies

Many feel the need to keep active, from a physical and mental perspective. This doesn’t necessarily mean having to become a marathon runner. Walking, gardening, yoga and golf are some common activities taken up to keep you active.

Learning something new, such as a new language, playing an instrument or crafting for example, can be a challenge to some, keeping their mind occupied.

The key is finding something that appeals to you and we all will have different hobbies that interest and excite us.

For some people, simply carrying on working is the most appealing to them. Ideally, this should not be financially driven, but more for enjoyment of the work achieved, or the purpose it provides.

Your Retirement

Your lifestyle in retirement should be how you want it to be, with your income and capital being used to facilitate this. The above is simply an indication of what you could do, however we appreciate everyone is different and there is no right or wrong path to take with filling your time in retirement. Whatever you do should be enjoyable for you.

Here at Eldon we help clients achieve their objectives and ensure that their retirement is how they want it to be, with capital and assets structured in a way to help meet these objectives. Once retired, life is all about you. You’ve worked hard to get to where you are and this is the time to enjoy life, in any way you see fit.

The minimum contribution to a workplace pension currently stands at 8%. This 8% consists of a minimum of 3% from your employer. This leaves you with the remainder of 5% to pay.

But what happens when you have been furloughed during Covid-19?

The government’s coronavirus Job Retention Scheme will cover the contribution made by your employer based on your furloughed salary. This is until 31st July and then your employer picks up the contribution as normal. You must still pay your own contribution. So, if you had to pay 5% before you were furloughed, you still pay 5% now but based on your new furloughed salary.

The downside is that, if you earn more than £2,500 pm then the 3% employer contribution on anything you earn above this, is not backed by the scheme. Your employer is not obliged to continue to pay above the auto-enrolment minimums as the rules have been relaxed during this time.

If you require advice or guidance on your pension, contact one of the team at Eldon who will be happy to help.