A Newspage friendly is writing an article for the Personal Finance Society membership magazine on how worried clients (and by default their advisers) should be about warnings by the OBR and the Chancellor of rising living costs? Additionally, how should clients prepare for increases in national insurance and the continual freezing of personal allowances? Finally, are there any aspects of the Budget that have been overlooked that matter to people's financial wellbeing and savings?
4 responses from the Newspage community
"The Chancellor's Budget will hopefully be a wake-up call to people. With interest rates at virtually 0%, inflation at 4% puts considerable pressure on living costs for those people who don't have assets or income that are linked to inflation. And frankly, that is most people. Advisers need to be very proactive and warn clients about the risks of holding cash and bonds in an inflationary environment, especially when it is normally the most conservative, risk-averse clients who hold the largest proportions of these in their portfolio. Are they aware they are taking on much larger - albeit a different type of - risk? This shows the traditional "tick the boxes and choose a risk level" approach to risk is at best antiquated and at worst highly dangerous to client's financial well-being."
"As advisers, we never worry about these things as we can plan for them. Therefore, by association, our clients will not need to worry. Inflation has been around for a very long time and it is not going away. When we create financial plans for our clients, we always factor inflation into these as it is the biggest danger to them maintaining their lifestyle over the long term."
"Rising inflation, higher taxes and fiscal drag (the freezing of allowances) is a worry at the moment and it's important that your financial planning takes this into account. When putting together financial plans for clients, I prefer to err on the side of caution. By allowing for 'margins of error' we should hopefully ensure that the client can weather some negative impacts such as higher inflation and higher taxes."
The Health and Social Care Levy has been specifically designed to incorporate the entire working population; the employed, self-employed and Directors of limited companies. It's therefore a very difficult tax to avoid. The one option available - if you can afford to do so - is to pay more into your pension. Salary sacrifice, in particular, could become an even more tax efficient way of making pension contributions, as this reduces the salary on which NICs are paid, resulting in a saving for both employee and employer.