Understandably, the topic on many people’s minds is elections. Given the UK General Election on the 4^th of July, we have been getting asked more frequently how any result is likely to impact investment markets, and therefore an investment portfolio.

We know uncertainty leads to volatility in investment markets. Investment markets are forward-looking hence known information is reflected in stock prices rapidly.

So what is priced in at present? Well, bookmakers have a Labour majority at 1/20 odds and a Conservative majority at 150/1 odds. With odds like this in betting, you can see where the consensus is heading. Investment markets have priced in a likely Labour majority already. As with any election, some volatility in the run up to polling day and the days after is expected, with more if unexpected results come to pass. However, as we have always advocated at Eldon, looking through short term volatility at the longer term returns is more important to your Financial Plan.

Looking back at historical elections, it is hard to pick out any particular trend in what the stock market has done, however the most relevant appears to be 1997, when a comfortable Labour win was widely expected at the time. However in all instances, an election that had a likely majority tended to result in more favorable market performance.

Year	FTSE 100 in 6 week run up	Outcome
1987	+9.70%	Thatcher win widely expected. British shares performed very well.
1992	-4.90%	All polls predicated a hung parliament. Nerves in the market led to a selloff. Conservatives won by a small majority.
1997	+4.39%	Polls showed Labour to win comfortably. Shares perfomed well with markets confident. Labour won by a landslide.
2001	+1.36%	Polls indicated a Labour win throughout the 18 months beforehand.  Markets up. Labour retain. Dubbed a “quiet landslide”.
2005	-0.41%	Polling was much tighter than previous election. Markets stayed relatively flat. Labour retained a small majority.
2010	-8.15%	By April the race was too close to call. Markets retreated due to uncertainty. Hung parliament.
2015	-0.12%	Polls indicated it would be the closest election in history. Markets stayed flat. Conservative won a surprise outright majority.

What often occurs through periods of volatility, particularly after significant daily drops, is that we see significant daily increases too. Ahead of time, it would be great to be able to pick and choose the days spent in the market, avoiding the downs, yet being invested for the ups. In reality, we know this just isn’t possible.

As ever, we come back to the adage that it’s “the time spent IN the markets, rather than trying to time the markets” that will reward investors in the long term. It’s important to remain disciplined through periods of volatility, should they occur over the remainder of this year, particularly with a US Election due in November too.

As part of this, investors need to ensure they are taking an appropriate level of investment risk in a well-diversified portfolio, resulting in a level of volatility they can tolerate from an emotional perspective (as well as financial) in the pursuit of returns over time.

So, although a General Election may cause some volatility (but also may not), there’s no reason to panic or make knee-jerk changes in light of this. Sticking to the long-term view is far more likely to benefit your Financial Plan.

The government has announced that it will put legislation in place to allow parents and carers to apply for National Insurance Credits where they have not claimed Child Benefit, to ensure that people do not miss out on their State Pension entitlement.

In most cases, you can get a full State Pension if you have 35 qualifying years of National Insurance contributions, and you need a minimum of 10 qualifying years to receive any State Pension entitlement. One way to earn a credit other than through employment or making voluntary contributions is by claiming Child Benefit. This means a parent or carer can be credited with National Insurance Contributions until their youngest child is 12, even if they are not earning.

Child Benefit payments are received tax-free as long as neither parent earns more than £50,000 a year. However, if earnings are higher than this, some or all of the Child Benefit will need to be repaid in an extra form of Income Tax known as the ‘High Income Child Benefit Charge’.

In April last year, the government recognised concerns that some eligible parents who had not claimed Child Benefit, often to avoid the High Income Child Benefit Charge, could miss out on their future entitlement to a full State Pension. The government said the issue would be addressed to ensure that those affected are not disadvantaged due to not claiming Child Benefit.

HMRC said legislation will be brought forward and will allow individuals to claim this credit from 2026, and eligibility will be closely based on the criteria for receiving Child Benefit. The credit will add qualifying years of National Insurance where eligible, which will support future State Pension eligibility. Transitional arrangements will ensure those affected since 2013 are still able to claim.

Going forward, applications will be available for 6 years following the relevant tax year and the government plans to bring forward secondary legislation as soon as possible.

You can read more about checking your State Pension entitlement here.

The end of 2023 saw positive news in markets, despite experts predicting doom and gloom for the economy at the start of the year. Inflation came in lower than expected and markets speculated that major central banks could cut interest rates through 2024. The Federal Reserve Bank set the table for as many as 3 interest rate cuts through 2024, whilst the Bank of England awaits further evidence that inflation will fall to the 2% target, and stay there, before lowering rates.

With many commentators suggesting that markets may be too optimistic about rate cuts this year, it is clear that the path to falling interest rates remains uncertain; both this and inflation will continue to dominate markets in the short term. So, what does this tell us about what we can expect in the coming months? The truth is nobody knows!

It is not possible to predict the short-term direction of markets and we can never know when they might fall suddenly, whether rallies will continue, and how long they will go on for, despite what headlines might say. Uncertainty in markets causes volatility and, as you might expect, the main factors that contribute to uncertainty are unknown events that cannot be predicted.

So, what does matter? We know it is important as Financial Planners to ensure that our clients are happy with the amount of investment risk they are taking within their invested portfolios. When we talk about risk, we generally mean the level of volatility within the portfolio, rather than the risk of losing all of your money. It’s really important to make sure this is ‘right’ for you as this, as well as maintaining a comfortable cash reserve, can make the difference between being able to accept market movements or not.

No matter what the forecasts are for the months ahead, our philosophy remains the same at Eldon – remaining invested in a well-diversified portfolio, appropriate for your circumstances, risk tolerance, and long-term goals, is what will ultimately lead to a much better outcome from an investment perspective, rather than trying to predict the short term and the unknown.

We are delighted to announce that we have made the 2023 New Model Adviser Top 100 list for the 12^th year in a row! There is only one other company (in addition to Eldon) to feature every year since the inception of Citywire’s accolade.

Citywire’s New Model Adviser® magazine provides news on personal and business development and insights into the financial services industry. The assessment process for their Top 100 list includes a range of criteria such as professional qualifications, investment philosophy, staff training, fees, service offering, community engagement, and client education. The award recognises outstanding achievements and prominent leaders in the UK financial planning profession.

Congratulations to the Eldon team and thank you to our clients – we couldn’t have achieved it without you!

On 1^st October 2023, the McCloud remedy regulations came into force to remove age discrimination across public sector pension schemes.

What is the McCloud judgment?

In 2010, the government determined that the cost of public sector pension provision was not sustainable and in 2015, reforms were made to public service pension schemes, which meant some members moved from Final Salary into new Career Average Revalued Earnings (CARE) schemes. This changed the way in which their pension benefits in the new schemes were calculated from this point onwards.

Scheme members that were close to retirement at the time were protected from moving to the new schemes and could therefore remain in their existing arrangements. Subsequently, the Court of Appeal found these protections to be discriminatory against younger members. This ruling is called the McCloud Judgment, after a member of the Judicial Pension Scheme involved in the case.

The changes that have been introduced to remove the age discrimination are known collectively as the McCloud remedy.

For reference, the six largest public sector pension schemes in the UK are the NHS, Civil Service, Local Government Pension, Teachers’ Pension, Police and Firefighters, and Armed Forces schemes.

How are public sector schemes changing?

The government is now taking action to remedy the above by reverting affected members of public sector schemes back into the legacy schemes for the seven-year period between April 2015 and March 2022. The intention is to recalculate their benefits based on what their position would have been if they hadn’t switched to the new CARE arrangements during this time. All members will then join the reformed CARE schemes from April 2022 regardless of their age.

At retirement, those affected will be able to make a choice between the benefits provided by the two different schemes, to ensure they receive the most beneficial option for them.

Overall, this will either improve their current position or leave it unchanged; members will be no worse off as a result of the remedy.

What do I need to do?

If you have already retired, your pension fund administrators will work out if you are due an addition to your existing pension. Schemes will be in contact as soon as they can after 1^st October 2023.

For those who are yet to retire, your scheme will provide you with sufficient information to allow you to make an informed decision prior to you taking your benefits.

For those still in active service (contributing to your benefits), in some schemes, there may be new opportunities available to you as a result of being classed as a ‘new entrant’ to the reformed scheme. If this applies, your scheme will contact you to make you aware of your options. Please be aware that there may only be a small time-window to make a decision, so it’s important to read any notification you receive regarding this.

If you have any questions about the impact of the McCloud Judgment on your pension, please get in touch with one of the team.

Gemma’s been out and about recently at the local St Francis Junior school in Newton Aycliffe as part of their brilliant Believe & Achieve Day. The day was a huge success for all and saw Gemma talking with students about Financial Planning as a career option, skills needed, pathways into it, and her own career path.

Very well done to all the staff at St Francis Junior School for organising an excellent day for their students. Even more so, a HUGE thank you to all the students who had researched Eldon and the jobs we provide and asked lots of inspired and fun questions about these. It was a very relaxed and fun day and lovely to share stories with so many bright young people! The future is bright in the hands of these ones!

We are extremely proud of our ‘skydiving team’ who successfully completed their 15,000ft skydives at Shotton Airfield on the morning of Sunday 25^th June.

A huge thank you to the team at SkyHigh Skydiving who kept them all safe and to each and every one of you who has sponsored them. Eldon will be matching their fundraising, as will an anonymous donor, which means they have raised in excess of £5,000 for the County Durham Poverty Hurts Appeal.

The money is actively being deployed across County Durham now to help combat poverty at a time when it is so very needed.

If you would like to read more (or see more pictures) their website is: https://cdcf.enthuse.com/pf/skydive

BRAVO JAMES, JENNY, KENNY & GEMMA! We are proud of you all.

The new chancellor, Jeremy Hunt, revealed the Autumn Statement on the 17^th November. A summary on the headline points is provided below:

State Pension

The Triple Lock for the State Pension is being reinstated, with State Pensions receiving the full inflationary increase of 10.1% (September 2022 CPI measure). As a result, the full flat-rate State Pension for individuals who reached State Pension after April 2016 will be £203.85 pw (£10,600 pa) from April 2023.

Income Tax

The income tax Personal Allowance, higher rate threshold, and the National Insurance limits are already fixed at their current levels until April 2026. This has now been extended for an additional two years, until April 2028.

In addition to this, the income tax additional rate threshold (45%) will be lowered from £150,000 to £125,140, from April 2023.

Inheritance Tax

The inheritance tax nil rate band was frozen at £325,000 until 2026. This has now also been extended until 2028. This will mean the tax-free allowance has been unchanged for almost two decades by that point.

Capital Gains Tax (CGT)

Changes to CGT have long been on the cards. This was another tax allowance that had previously been frozen until 2026. However, the Annual Exempt Amount of £12,300 will instead be cut to £6,000 from April 2023 and then to £3,000 from April 2024. The rates of CGT applied to amounts over this exemption are to remain unchanged.

Dividends

The Dividend Allowance is to be reduced from its current level of £2,000 pa also. This will be £1,000 pa from April 2023 and then £500 pa from April 2024. This is the level of dividends an individual can earn before tax is due on those dividends. Above this level, the tax rate incurred on dividends will remain unchanged.

Other Announcements

Some other announcements were:

• Previously announced but confirmed again, Corporation Tax will increase to 25% from April 2023.

• The increases to Stamp Duty Land Tax thresholds will now only remain in place until 31^st March 2025.

• Oil and gas companies tax rate will increase from 25% to 35%, starting in January 2023. This windfall tax has also been extended, previously set to end in December 2025 but now ending in March 2028.

• A 45% tax on profits of older renewable and nuclear electricity generation.

• The cap on energy bills of £2,500* pa for an average household will remain in place until April 2023. This will then rise to £3,000* pa for 12 months.

*This cap sets a maximum price that energy suppliers can charge consumers for each unit of energy they use. Therefore, how much you pay will still depend on how much energy you use.

People are being encouraged to take action to trace their lost pension pots, with almost three million pots worth a total of £26.6 billion not currently matched to their owners.

The Pensions Policy Institute has published a briefing note which shows that the scale of lost pension pots has increased by £7 billion from 2018 to 2022.

In recent years we have seen an increase in people moving house and more people changing jobs through the Coronavirus pandemic, potentially exacerbating the problem of lost pensions.

It can be tricky to keep on top of all of the pension schemes you’ve paid into throughout your working career, but it’s important to track these down to ensure you’re claiming everything you’re entitled to in retirement. These lost pots, with an average value of £9,500 each, could make a real difference if they were reunited with their owners.

There are five simple steps to take to trace a pension:

• Retrace career steps
• Check old papers
• Check that the details on paperwork are up to date
• Check for any gaps in your pension history
• Contact your pension provider

If you are unsure who your pension provider is, you can ask your employer or use the Pension Tracing Service. This is a free Government service that can help you find contact details for a workplace or personal pension scheme.

Once you’ve found your pension, you will need to contact the provider to find out how much it’s worth. It is also important to take a closer look to check the rules around the retirement age, whether the investments are suitable for your circumstances and the total charges.

If you would like any more information on the above, please do not hesitate to contact a member of our team.

Rising inflation has been a theme of 2022, and September’s inflation figure has now been announced, with the Consumer Price Index (CPI) at 10.1%. According to the Office for National Statistics, this has been driven by increases in the price of food despite declines in fuel prices.

September’s CPI is a significant figure, as each year a number of pension schemes use this figure to uprate pensions from the following April.

Most schemes, however, cap their inflationary increases to pensions in payment and in deferment, with a common cap of 5% applying, meaning the inflationary increase applied to many pensions will be much lower than inflation.

It is therefore important to check the scheme rules of your pension scheme to understand how any inflationary increase is applied. This is something that we undertake at Eldon for our clients and factor into our financial planning.

The September figure is also the inflationary figure used by the government for increasing benefits and the State Pension.

The State Pension, as things stand, increases in line with the triple lock, which is the higher of:

• CPI, currently 10.1%.
• Average wage increase – September’s figures are not yet available, but this was 5.4% in August
• 2.5%

If the triple lock is maintained, we will see the State Pension increase by 10.1% from April 2023. This means the new State Pension amount would be £203.85 per week, up from £185.15 per week. With a Conservative Party leadership contest now underway however, we await confirmation of the government’s commitment to the triple lock.

The average wage element of the lock was temporarily suspended in April 2022 to avoid a disproportionate rise in the State Pension, breaking a key manifesto pledge by the Conservatives. Historically, the largest triple lock increase to the State Pension was 5.2% in 2012/13.

Previously tax thresholds, Lifetime Allowance (for pensions) and Inheritance Tax nil rate bands were due to increase by inflation. These were frozen in April 2021 following the pandemic however, meaning tax thresholds are not increased by this significant level.

Rising inflation remains a concern for the Bank of England, and with inflation at more than five times the target of 2% for CPI inflation, it seems likely that future base rate increases in the short term are to be expected.

At what level and how long interest rates may stay at a raised level is unknown. This will undoubtedly be influenced by the UK government. As we have seen over the past 6 weeks, the landscape for this can change at a fast pace.