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Even carefully laid financial plans can go astray. Financial shocks, such as losing your job or being too ill to work, can affect your financial security. Yet, figures show many Brits aren’t taking the necessary steps to improve their financial resilience.

A financial shock can cause short-term stress and money worries. But they can also have a long-term impact, for example, if you’re forced to dip into savings earmarked for something else, stop contributing to your pension, or need to take a mortgage holiday. Preparing for the unexpected can help place you in a position where financial shocks can be managed.

Brits are failing to prepare for financial shocks

Despite feeling confident about their financial situation, a survey found many Brits aren’t in a position to manage financial shocks. The survey rated respondents in four main areas:

  1. Getting the basics right
  2. Managing borrowing
  3. Protecting against the unexpected
  4. Planning for the future

Out of a score of 25, respondents scored just three on protecting against the unexpected. Planning for the future scored only slightly higher at five. While Brits are good at keeping on top of day-to-day spending and borrowing, looking further ahead is often overlooked.

While we hope things will stay on track, planning for the unexpected can provide security. As part of your financial plan, protection against the unexpected should be considered. No one wants to experience a financial shock, but they do happen. And they’re often outside of your control. Taking steps to consider how your finances would hold up and what you can do to improve resilience is important.

Securing your finances in the short term

When a financial shock occurs, it’s usually your short-term finances that are your focus. This may be because your regular income has stopped or you need to dip into other assets to cover essential outgoings. Luckily, there are steps you can take to help secure your short-term finances when something does happen.

  1. Have an emergency fund. We should all have money set to one side for a rainy day. This money should be easily accessible and, ideally, cover between three and six months of expenses. This means you don’t have to worry about regular outgoings should a financial shock interrupt your income. It can give you some space to deal with the shock and put a long-term plan in place if you need to, without worrying about how you’re going to meet this month’s bills.
  2. Reduce debt. Borrowing can be incredibly useful, and it’s likely you’ll take on a range of different debts throughout your lifetime. However, paying down debt while your financial situation is secure can help build resilience too. For instance, overpaying on a mortgage may mean you have an opportunity to take a payment holiday should a financial shock happen. Having fewer financial commitments can make it easier to manage a financial shock.
  3. Consider income protection. Income protection is a financial protection product that can provide a regular income if you’re unable to work due to accident or illness. These policies typically pay out a percentage of your salary, say 70%, until the policy ends, you return to work or until retirement. Knowing you have a policy that will provide an income should you need it can provide peace of mind and allow you to focus on recovering.

These three steps can help improve your resilience, placing you in a better position to overcome financial shocks and the short-term instability they cause. But you also need to consider the long-term impact too.

Ensuring your long-term plans stay on track

In some cases, a financial shock can have a long-lasting impact. This may be because the effects move from short to long term or due to the decisions you make affecting other plans. But what can you do?

We’ve already mentioned that income protection products can be a useful way to create an income while you’re unable to work. But other insurance policies can be useful in the event of a financial shock and are worth considering too. Critical illness cover, for example, will pay out a lump sum on the diagnosis of certain illnesses that could mean you need to give up work permanently or need to take an extended period off. This lump sum may allow you to take steps like paying off your mortgage and improve your financial situation over the long term while allowing you to focus on other areas of your life.

When taking out insurance policies, it’s important to weigh up the different options to see what is right for you and your priorities. Please get in touch if you’d like to talk about financial protection policies.

During and following a financial shock, it’s important to review your finances with your long-term goal in mind. You may, for instance, have paused pension contributions or used savings to get you through the short term. Understanding the impact of this can help you stay on track for long-term goals. In some cases, a review will simply provide peace of mind that a financial shock hasn’t derailed plans, in others, it may show you need to take additional steps to remain on track.

Please contact us if you have any questions about your financial plan and ability to weather financial shocks. Our goal is to help you create a financial plan that you can have complete confidence in, including when the unexpected happens.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

2020 has been an eventful year for investment markets. Impacted by the Covid-19 pandemic and government responses to this, there have been many valuable investment lessons that will apply in 2021 and beyond.

As the extent of the pandemic became known in March, stock markets around the world suffered sharp falls. In fact, fears of a recession meant the FTSE suffered its biggest fall since the 2008 financial crisis and trading was temporarily suspended on Wall Street as circuit breakers were triggered, according to the Guardian.

Since then, markets have bounced back but continued to experience volatility. The uncertainty of the situation, with governments changing restrictions and support as they try to control the virus, affected markets throughout the summer and autumn.

So, 2020 has been useful in highlighting the investment lessons we should keep in mind.

1. The unexpected does happen

A year ago, who would have predicted that a global pandemic would have occurred? It’s probably not something you’ve ever considered when weighing up investment risks. Yet, it’s had a huge impact on investment volatility and opportunity in 2020.

This year has taught us that the unexpected does happen. We can’t consider every eventuality but preparing for the unexpected can improve your financial resilience. In terms of investing, this may mean having liquid assets or a rainy-day fund you can use if investment values fall. This is particularly important if you’re drawing an income from investments. Having options for when the unexpected does occur should be part of your financial plan. 

2. Volatility is part of investing

No one wants to see the value of their investments fall. But volatility is part of investing. When you invest, you need to be aware of the risk that values can fall.

This is why a long-term time frame and goal is so important when investing. Short-term volatility is often smoothed out once you look at investment performance over a longer time frame. It can be frustrating to see that investment values fell in 2020, but when you look at performance over the last five years, for example, you’ll probably still see an upward trend.

3. Diversifying is important

We all know we should diversify our portfolio. Investing in a range of assets, industries and geographical locations can help spread the risk. When one investment falls, another may perform better helping to create balance.

Covid-19 has had a far-reaching impact, with countries around the world affected by the virus. However, some industries have been affected far more than others. Travel and hospitality businesses, for instance, have been forced to close for weeks at a time in many places. In contrast, the pandemic has created opportunities for some firms too. While a balanced portfolio will still have suffered volatility, it can lessen the impact.

4. Financial bias can affect us all

Investment markets have featured in the news more heavily than usual this year, thanks to the volatility experienced. If headlines or talk about the markets meant you considered changing your strategy, financial bias is likely to have played a role.

Financial bias simply means other factors besides facts have influenced your investment decisions. When markets fell sharply at the beginning of the pandemic, an emotional reaction that means you considered taking money out of the markets is normal. However, recognising where bias occurs and limiting the impact is important. Working with a financial adviser can help you with this as you have a professional you trust and one that understands your situation to talk to.

5. You can’t time the market

Finally, the events of 2020 have supported the saying: It’s time in the market, not timing the market.

If you’d tried to guess when to put your money into the stock market and exit this year, you’d probably have ended up making mistakes. Trying to time the market to maximise returns is incredibly difficult, as so many factors play a role. Even investment professionals with a huge number of resources make mistakes.

Rather than trying to time the market, creating a long-term plan and sticking to it is usually the most appropriate strategy for investors.

What to expect in 2021

So, what lies ahead for the next 12 months? With lockdowns and restrictions continuing around the world, we expect further investment volatility as we head into 2021. But if 2020 has taught us anything, it’s that we can’t predict what’s around the corner. Think about your aspirations and build a long-term financial plan around these, including investing where appropriate.

Please get in touch if you’d like to review your investment portfolio for the year ahead.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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.

Stock markets in 2020 have been characterised by volatility and uncertainty. If you’ve made financial decisions based on your feeling towards this, it could have cost you money.

Whenever we make a decision, we have to weigh up the different options. While reasons and facts should be the basis for any decision you make, emotions play a role too. Where this happens when making financial decisions, this is called financial bias. It can mean you end up making decisions that aren’t appropriate for you.

In recent months, as markets have experienced volatility and economic uncertainty has featured in the news, this may have affected the decisions you’ve made too.

Moving to cash due to Covid-19 cost investors 3%

According to behavioural finance experts Oxford Risk, investors that responded to Covid-19 uncertainty by moving more of their wealth into cash could have missed out. By switching to cash for ‘emotional comfort’ it’s calculated that investors have missed out on returns of 3% or more a year.

Separate research also suggests that investors moved more of their wealth into cash in response to Covid-19. In the first half of 2020, UK households put away £77 billion in cash, taking the total amount saved in cash accounts to £1.5 trillion. While a cash account to cover emergencies is advisable, it’s estimated that nearly £1.2 trillion of this cash isn’t needed for contingencies.

With cash accounts currently offering low-interest rates, it’s estimated that UK households have missed out on £38 billion in potential investment returns.

While investing does come with risk, it can help your money grow at a faster pace than when using a savings account. However, you need to invest with a long-term time frame, a minimum of five years. This provides an opportunity for short-term volatility to smooth out. Investing for a short period means there’s a higher chance that you could lose money due to short-term downturns.

There are many reasons investors held more of their money in cash during the first half of this year. But for some, financial bias will have played a role.

For example, information bias occurs when investors evaluate information, even if it doesn’t relate to their situation. It makes it difficult to assess what information is relevant. The sheer amount of information can be overwhelming. During the pandemic, investors have been bombarded with news, forecasts and opinions about what will happen. With much of this coverage negative, it’s natural that some investors will have had an emotional reaction and decided that cash was safer.

Trying to time the market provides an opportunity for financial bias

It’s not just a trend that is having an impact due to Covid-19 either. When the markets are performing well, it can be tempting to increase how much of your wealth is invested. In contrast, it’s common to want to move your money to ‘safety’ at times when markets are performing poorly or experiencing volatility.

However, this can mean you end up buying assets while prices are high and selling at low points. Oxford Risk estimates this type of financial bias can cost investors an average of 1.5% to 2% a year over time. Over a long-term investment strategy, financial bias can end up costing you significant sums.

While it can be tempting to move money in and out of investments to maximise returns, trying to time the market is difficult. As the above averages show, you’re more likely to miss out on returns than to increase your portfolio’s value. For most investors, a long-term investment strategy is appropriate.

Minimising financial bias: Stick to your long-term plan

Creating a long-term plan based on your goals and sticking to it can help you minimise the impact of financial bias. That can be easier said than done, though, especially at times of uncertainty. Working with us can help you here. A financial planner will be able to help you understand your long-term financial positions and act as a second pair of eyes when you want to make changes. It can mean financial biases can be highlighted and discussed.

That doesn’t mean you should never make changes to your financial plan. After all, circumstances and goals do change, and your financial plan may need to change to reflect this. However, this should be driven by long-term aspirations and be based on evidence.

Please contact us, if you’d like to go through your financial plan and investment strategy.

Please note: The blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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.


Naming a Lasting Power of Attorney is something that we should all do. It’s something that can provide us with security if we’re unable to make decisions. While it’s often something that’s associated with being elderly, it’s just as important for younger generations to take this step too.

A Power of Attorney gives someone you trust the power to make decisions on your behalf if you’re unable to. When you think about situations in which you would need this, most people think of losing mental capacity through dementia. But Kate Garraway’s story has recently highlighted why it’s important to have a Power of Attorney in place even when you’re healthy.

Kate Garraway’s experience highlights the importance of a Power of Attorney

ITV presenter Kate Garraway has featured in the news throughout the Covid-19 pandemic after her husband took ill. Her husband Derek has been hospitalised with Covid-19 since March and has been in a coma for much of the time. In his early 50s, Derek isn’t someone you’d usually associate with losing mental capacity. However, Kate has spoken out about the challenges.

In an interview with ITV, she said: “One of the practical problems – which a lot of people would have experienced if they’ve got the absence of someone in their life – like many things, the car is entirely in Derek’s name, the insurance is in Derek’s name, a lot of our bank accounts. There are lots of financial goings-on which are making life very complicated because I can’t get access to things because legally, I haven’t got Power of Attorney.”

The lack of a Power of Attorney means that loved ones can be left dealing with a financial mess and inability to manage it while you’re unable to make decisions. It can lead to complications and affect your financial security in the future.

Power of Attorney doesn’t just cover financial issues either but may cover the decisions about your health and care. If you’re ill, for example, a Power of Attorney will be able to make decisions about the type of care you have, including life-sustaining treatment. Without a Power of Attorney, you may be left in a vulnerable position.

3 reasons you might be putting off naming a Power of Attorney

1. “I’m too young to need one”

Needing a Power of Attorney is often associated with losing mental capacity due to age. However, accidents and illness can happen at any time. It’s a step that can protect you should the unexpected happen.

A Power of Attorney isn’t always permanent, it can be temporary until you’re able to make decisions again. It’s also important to note that you may want a Power of Attorney to make decisions on your behalf even if you have mental capacity. Handing financial decisions over to someone you trust while recovering from an illness can mean you’re able to focus on what’s most important.

2. “It will never happen to me”

This is a common reason for not naming a Power of Attorney. It can seem like a hassle for something that you will never need to use.

While it’s true that most people that name a Power of Attorney, thankfully, don’t need to use them, it acts as protection just in case. The chance of your home getting damaged in a fire is very small, but you still take out building insurance to give yourself peace of mind. View naming a Power of Attorney in a similar way; you hope it won’t need to be used, but it’s there in case you do.

3. “My partner will be able to make decisions on my behalf”

If you’re married or in a civil partnership you may mistakenly believe your partner will be able to make decisions on your behalf. However, no one has the automatic right to make decisions for you.

Not having a Power of Attorney can not only leave you in a vulnerable position but your loved ones too. Even if you hold a joint bank account, one party losing mental capacity can mean the account is frozen as it cannot be operated independently of each other.

Naming a Power of Attorney is simple and can protect you

Despite thousands of people putting off naming a Power of Attorney, it’s a simple step to take.

You can fill in the forms online here or download paper forms to post here. You can ask a solicitor to help you if you wish, but the forms are relatively straightforward, and you don’t need to use a legal professional. Once the forms are completed, you need to register a Power of Attorney with the Office of the Public Guardian for it to be valid. This is a process that takes between eight and ten weeks and costs £82 per Power of Attorney.

There are two types of Power of Attorney. The first covers financial and property affairs and the second covers health and care. You should make sure you have both in place.

If you have questions about Power of Attorney and how it fits into your wider plans, please get in touch.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning.

If you’ve yet to finish your Christmas shopping and simply don’t know what to buy for a child, a financial gift can last far longer than the latest fad. It might not be as exciting as unwrapping a toy, but at a time of year when they’re going to receive plenty of presents, money can be the perfect gift.

As a parent, you may have already purchased some presents and know they have plenty to keep their attention over the festive period. Giving money at Christmas can mean the gift can be useful in the coming months or even saved until they’re an adult.

Your child may also receive money from family and friends who aren’t sure what to purchase too. Last year, 45% of Brits planned to give cash as a Christmas gift, according to research from the Post Office. While children may be eager to spend it in the sales, putting some of it away for a rainy day can be beneficial.

Whether family and friends have gifted money, or you want to set some aside rather than splurging on toys, here are three options you may want to consider.

1. Savings account

A general savings account in a child’s name is a great option if you want flexibility.

Adding Christmas money to a savings account means it’s there for when they want to use it later, whether that’s to buy a toy in a few months, pay for a school trip or save it. It’s a step that can help instil good money habits and show how saving can mean gifts can add up.

While interest rates are low, children’s accounts are typically more competitive than their adult counterparts. So, it’s worth shopping around to get the most out of their money. Accounts with restrictions will usually offer the highest interest rates. Restrictions may include limiting withdrawals and contributions. Make sure any account you pay into gives you the flexibility you need.

2. Junior ISA

Start building or add to a nest egg by adding Christmas money to a Junior ISA (JISA). It might not be as fun as the latest toy, but they’ll really appreciate it when they’re older and can use the money for university, buying a car or travelling.

A JISA is an option when you want to save for the future. The money won’t be accessible until the child turns 18, at which point they can use it how they wish. Adding to a JISA can help make reaching milestones and goals as a young adult easier. Each tax year, you can add up to £9,000 to JISAs per child. It can add up to a sizeable sum for their 18th birthday.

If you plan to add Christmas gifts to a JISA, the first thing to consider is the type of account. You can choose from a Cash JISA and a Stocks and Shares JISA.

With a Cash JISA, the account will benefit from interest. Like savings accounts, Cash JISAs usually offer higher interest rates than standard ISAs. So, searching for a competitive rate is important. However, you should keep in mind that current interest rates are unlikely to keep pace with inflation. As a result, the savings can fall in value in real terms.

A Stocks and Shares JISA will invest the money. This gives the gift an opportunity to grow at a faster pace. But it also comes with investment risk. The money will experience volatility and could fall in value. The time frame is an important consideration when investing. You should plan to invest for a minimum of five years, as this provides a chance for volatility to smooth out.

If you’re not sure which JISA account is right for your plans, please get in touch.

3. Premium Bonds

A different option to consider is purchasing Premium Bonds. Anyone can buy Premium Bonds for a child and they can hold up to £50,000 worth.

Premium Bonds are the UK’s biggest savings product, with around £88 billion saved in them. But they work differently to your usual savings products. Rather than paying out interest, Premium Bonds are entered into a prize draw each month. The more bonds you buy, the more times you’re entered into the prize draw. Prizes range from £25 to £1 million. When you withdraw the money, you’ll get back the same amount you deposited.

So, while Premium Bonds are advertised with an average interest rate, you’re not guaranteed this. In fact, most people will receive less than the rate advertised, but there is a small chance you’ll receive a larger prize too. Whether it’s the right choice for your child’s savings will depend on your goals.

Christmas gifts can be used to start a nest egg, but you may also want to make regular contributions. Setting aside money for children can mean they have a helping hand as they reach adulthood. Please get in touch if you’d like to discuss how you can create a savings or investment plan for your children. 

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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.

The Financial Conduct Authority does not regulate National Savings & Investment products.

The way people see retirement has changed over the years. It’s no longer the stereotypical comfortable slippers and a relaxed lifestyle. Indeed, for many, it’s very much a second life – the time to enjoy doing things they couldn’t because they were too busy working and raising a family. 

If you’re within a year of retirement, here are ten simple steps you can take that will give you the best possible chance of enjoying your life when you finally decide to stop work.  

1. Make sure you have a plan in place

If you haven’t done so already, now is the time to put together a plan for your retirement.

Your plan should include:

  • The sort of things you want to do once you finish work
  • When you want to do them
  • The commitments you have
  • The pension and savings you have available to fund your retirement.

You should also include a list of all your regular monthly outgoings, as well as noting any anticipated big future expenditure. This will give you a decent idea of how much income you’ll need, whether you still need to save, and if you need to make any changes to your lifestyle.

Remember, you can update your plan as you go through retirement.

2. Review your current pension arrangements

A large part of your income in retirement will likely come from your pension arrangements.

Make sure you have details of all your plans and get up-to-date values for each. If you’ve lost track of any of your pension details, there is a Pension Tracing Service to help you find missing details.

As well as values and projections for your planned retirement date, also check the full details of the type of arrangements you have. In particular, you should find out how your funds are invested, and what benefits are available.

3. Consider consolidating your different pensions

If you do have a lot of different pension arrangements, consolidating them all into one single plan means you won’t have a whole series of statements to keep an eye on – just one plan with a single view.

Consolidating will make it much easier to keep track of your pension value, especially when you start drawing income from your fund. It also means you can potentially reduce the charges you’re currently paying and could also give you access to a wider choice of investment funds.

However, you should seek financial advice first as you need to ensure you don’t give up any valuable benefits, such as guaranteed income, by transferring out of an existing scheme.

4. Continue making contributions

Even if you’re only a year away from retirement, a final boost to your pension fund is well worthwhile.

The tax relief on pension contributions makes them one of the most efficient ways of saving money. The government adds an extra 20% to any amount you personally contribute if you are a basic-rate taxpayer – that’s immediate growth of 20% without you having to do anything!

Higher-rate tax relief makes pensions equally attractive as you get basic rate relief straight away, and can then claim back higher rate relief through your tax return.

5. Remember, it’s not just pensions

As well as pension arrangements, don’t forget other assets you may have that could form part of your retirement income planning.

If you have ISAs, for example, they can be a very tax-efficient way of taking an income during retirement as you don’t pay any tax when you withdraw money from them.

Other possible sources of income or lump sums could include:

  • The value of your property. You may want to consider downsizing to a smaller property once you’ve retired – maybe somewhere quieter or closer to family.
  • Other savings and investments such as shares or Premium Bonds.

6. Try to clear any outstanding debts

You should make sure you are as debt-free as possible when you retire.

You’ll likely be earning less in retirement than you currently do while working, so credit card and personal loan repayments will make a real dent in your disposable income each month.

You may have earmarked any lump sum you get from your pension for other purposes, but if you still have hefty debts, you should seriously consider using this to clear them.

7. Check your State Pension entitlement

Although it’s unlikely to be enough to live on, the new State Pension of £175.20 per week (2020/21) provides a guaranteed income for the essentials such as utility bills and food, and it increases each year.

The amount of State Pension you receive will depend on the number of qualifying years of National Insurance Contributions (NICs) you have. To get the full amount you’ll need 35 qualifying years of NICs.

If you have gaps in your NICs, you may not receive the full amount. You can request a forecast to find out exactly how much your State Pension will be and when you’ll get it.

8. Review your investment strategy

How you invest your pension fund, and any other savings you have, is an important factor in determining the income you could receive during your retirement.

A sudden drop in value could impact on your plans to retire as it may take time for your fund value to recover to where it was. You may therefore want to consider starting to move some or even all your fund to lower-risk investments as you move towards retirement.

Investing can be complicated, so if you aren’t sure about different investment strategies, we’d strongly recommend you take financial advice.

9. Check you have an emergency fund

Regardless of how you invest your savings, stock market turmoil, such as the last few months, can impact on all investments – even if it’s only for a short period.

Taking income from your pension at this time can be expensive, as you’ll cash in more investment units, and therefore miss out on future growth.

One way to avoid this is to have an emergency cash reserve that can provide you with an income for a short period while you wait for markets to recover. A very rough rule of thumb is to have three months’ income in cash as an emergency fund.

10. Take financial advice

With so many choices available to you at retirement, taking professional advice can help you to avoid costly mistakes. Financial advice can help you to ensure you have enough to last you through retirement, that your income is drawn tax-efficiently, and that you can live the life you want with the money you have.

Please get in touch if you’d like to find out more about how we can help.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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

The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.

If your estate could be liable for Inheritance Tax (IHT), gifting is one solution for passing on wealth while reducing the bill that could be appropriate for you. Our latest guide explains the basics of IHT and what you need to consider if you want to make gifting part of your long-term financial plan.

The guide covers:

  • What Inheritance Tax is and when it has to be paid
  • What Potentially Exempt Transfers (PET) are and how they affect IHT
  • Gifting allowances that allow you to pass on wealth or assets to loved ones free from IHT
  • How a charitable legacy can reduce an IHT bill
  • Reliefs that allow you to gift certain assets free from IHT

Click here to download your copy of our Inheritance Tax and gifting guide.

IHT can significantly reduce what you leave behind for loved ones, but there are often things you can do to reduce the bill. If you’re worried about IHT, please contact us. We’ll help you put a plan in place that considers your legacy, including gifting where appropriate.

Please note: The Financial Conduct Authority does not regulate estate or tax planning.