Mantle Financial Planning ® Chartered Financial Planners & Tax Advisers 2018-11-15T16:12:59Z http://www.mantlefp.com/feed/atom/ WordPress Colin Caulfield <![CDATA[State Pension Age Increase Saves Government £11bn Per Year]]> http://www.mantlefp.com/?p=6983 2018-11-15T16:12:59Z 2018-11-14T13:01:41Z 670,000 people each year will have to wait longer before benefiting...

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Increases to the state pension age means approximately 670,000 people each year will have to wait longer before benefiting, while the government could save £11bn a year in this time, according to analysis from Aegon. 

This saving could therefore be used to fund the promised increased spending on the NHS and social care, as we face an ageing population.

The state pension age for men has been 65 since 1925, and it became 65 for women from 6 November 2018. However, just one month later, starting in December 2018 and spread over the course of 48 months, it will gradually increase for both men and women to age 66. Starting in December 2028, the state pension age will again increase to 67. 

Since 1925, life expectancy has increased drastically, with men expected to live for an additional 18.32 years once reaching 65, whereas it was just 11.3 years back then, according to figures from the Office for National Statistics. Life expectancy increased further for women, who were expected to live for a further 13.07 years in 1925, compared to 20.88 years today.

As people are living longer, state pensions are paid over a longer period and to more people, therefore costing more. State pensions do not have a specific fund and are instead paid from National Insurance contributions paid by today’s workers, so the government has justified increasing the state pension age to keep it affordable.

The full amount of the new state pension is currently £164.35 per week, or £8,546 per year. However, only those that have contributed towards National Insurance for 35 years receive this, while others who have entitlements to a previous earnings related state pension may be entitled to more.

If you would like more information, please contact us >>

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Investment Committee <![CDATA[Weekly Market Update]]> http://www.mantlefp.com/?p=6980 2018-11-12T14:55:28Z 2018-11-12T07:00:37Z The US midterm elections resulted in Democrats taking the House...

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The US midterm elections resulted in Democrats taking the House of Representatives and the Republicans maintaining control of the senate. Donald Trump’s legislative agenda appears to be constrained for the next two years which is probably the most positive outcome that the market could have hoped for. The result was swiftly followed by political scandal within the administration. President Trump sacked his attorney general Jeff Sessions, replacing him with the controversial Matthew Whitaker. This prompted concerns in some quarters that the president was trying to shut down the investigation into Russian meddling in the 2016 election.

The US Federal Reserve left interest rates unchanged but reinforced their outlook. Unemployment remains low, household spending remains strong, and inflation is running in-line with their 2 per cent inflation target. In other words, today’s near unanimously expected pause looks almost certain to be followed by a rate hike at the December meeting. The only negative in the statement was the central bank’s highlighting of a moderation in business investment. Data also showed that US mortgage applications had fallen to their lowest level in four years, as rates continue to rise.

Chinese exports grew 15.6 per cent in October in US dollar terms, despite US tariffs on Chinese-made goods. This is down to the roughly 10 per cent fall in the yuan, which has made exports more competitive, but is also a function of companies making purchases before the US tariffs rise to 25 per cent form 10 per cent later this year. The value of the country’s imports also jumped more than expected, providing some relief after the release of softer-than-expected gross domestic product and industrial production statistics last month.

Global oil benchmarks entered a bear market last week, falling more than 20% from their peak at the start of last month. This followed an easing of supply concerns as oil inventories rose and as the US granted waivers from Iran sanctions to some of its major customers, including China.

UK GDP grew by 0.6 per cent quarter-on-quarter in the three months to September, its fastest rate since the fourth quarter of 2016. The figures were in line with expectations and annual growth was 1.5 per cent. After a strong summer, there are some signs of weakness in September, with slowing retail sales and a fall-back in domestic car purchases.

If you would like more information on the above article or advice on your personal financial circumstances, please contact us >>

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Investment Committee <![CDATA[Weekly Market Update]]> http://www.mantlefp.com/?p=6976 2018-11-05T13:38:07Z 2018-11-05T07:30:28Z Last week marked the end of a volatile month as global markets fell by $5.5 trillion in October...

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Last week marked the end of a volatile month as global markets fell by $5.5 trillion in October, with the S&P 500 losing $2.1 trillion in value. Key drivers included rising US bond yields, fears of fresh US tariffs on China, and a potentially more challenging outlook for US corporate profits going forward. The recent strong annual earnings growth from corporate America has given rise to end of the cycle fears, particularly given that the positive effects of Trump’s tax cuts will start to fade as we move into 2019.

Investors also took confidence from signs of a potential breakthrough in the trade dispute between the US and China, with reports that President Trump wants to offer China a deal in time for the G20 meeting. However, a fundamental improvement in relations between the two countries will require more than words. This may be the case as China’s leadership signalled that further stimulus measures were being planned, following more disappointing economic data. China’s official manufacturing Purchasing Managers’ Index (PMI) for October was just above 50, suggesting that any growth expansion was marginal.

US jobs data came in much stronger than expected, providing an element of certainty surrounding December’s interest rate rise decision. The unemployment rate stayed at 3.7 per cent, the lowest since December 1969, while wage growth picked up to 3.1 per cent year-on-year.

There was some relief within Europe after rating agency Standard & Poor’s failed to downgrade Italy’s sovereign debt rating, although it did lower its outlook to negative, arguing that the new government’s policy plans were weighing on the country’s growth and debt prospects. Indeed, Italian manufacturing shrank the most in almost four years during October, signalling continued weakness after the economy failed to grow in the third quarter.

Central bank buying of gold hit its highest level since the fourth quarter of 2015. More than 148 tonnes of the precious metal were bought by the national banks in the third quarter, a rise of 22 per cent on the same period last year. Russia’s central bank led the buying, purchasing more than 92 tons of gold. This marked the country’s biggest quarterly net purchase on records that stretch back to 1993. Gold is often considered as a hedge against any fall in value of the US dollar and Donald Trump’s international policies have resulted in several countries announcing plans to try and reduce their use of the US currency.

Oil prices fell to a seven-month low after data from the US Energy Information Administration showed crude inventories in the countries rose for a second week. The US also granted waivers to eight counties to allow them to keep buying Iranian oil despite new US sanctions against the country coming into force this week.

If you would like more information on the above article or advice on your personal financial circumstances, please contact us >>

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Colin Caulfield <![CDATA[Market Turbulence]]> http://www.mantlefp.com/?p=6968 2018-10-29T15:05:50Z 2018-10-31T14:57:42Z Market falls never feel pleasant, but for those with long-term investment horizons there is no need to panic

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Jon Cunliffe, Charles Stanley Chief Investment Officer, explains how investors should view the recent market turbulence:

Market falls never feel pleasant, but for those with long-term investment horizons there is no need to panic. Fluctuations, sometimes significant ones, are to be expected during the course of investing; and for those requiring the assurance of no fall in capital the only asset class that can be considered is cash. This is the second period of increased volatility that we have faced this year following the February/March pull back. Reasons for this latest bout of volatility have been much discussed – and the focus has tended to be on global bond yields coupled with a rumbling, US-driven, trade war.

 The global economic environment has been improving for a number of years, while inflation and interest rates have remained relatively low. Central banks have kept their monetary policy accommodative for a prolonged period, which helps support global asset prices. This backdrop has allowed companies to grow and their valuations to rise, while market volatility has been around record low levels for a very long time.

 One of the triggers for recent corrections has, counterintuitively, been strong data and economic progress from the United States. This has led to expectations of faster interest rate rises in the country, which pushes bond yields up and prices down. A trade war and rising oil prices can also be considered to be both politically destabilising and inflationary. Comparing companies’ future earnings expectations with higher rates of inflation and borrowing costs can cause a selloff in shares. If your “risk free” asset is yielding more, then risky assets become less attractive to investors.

 To sum up: against the background of this more uncertain outlook, investors have required additional compensation to hold equities. This is represented by a higher equity risk premia or lower earnings multiple, in essence a cheaper valuation.  And this is something that we’ve seen happening this year.

 This correction is a reminder that economies and markets can move in different directions, something that often gets forgotten. Strong economic data such as the current rate of US GDP growth is not always positive for investments. It depends on the implications of that data and what has already been taken into consideration. Although a strong economy, relatively supportive financial conditions and a gradual increase in interest rates back towards more “normal” levels would be seen by many as a favourable investment environment, it is evident from recent price action in the markets that the journey towards less accommodative central bank policy and higher interest rates may well be a bumpy one.

When the stock market is suddenly headline news, which it inevitably is during falls but rarely, it seems, during rises, taking a step back can be difficult. However, the right course of action is to decide whether anything has fundamentally changed in your investment rationale.

 The current theme embraced by the equity ‘bears’ is that the current, nine-year long, economic (and market) cycle is long in the tooth and therefore about to come to an end.  We would argue that cycles don’t die of old age but end because of overheating – in essence, too much froth in the economy or too much exuberance in markets.  It’s not obvious to us that the global economy is running too hot – inflation is generally at or below levels central banks would like to see.

We would argue, therefore, that there is scope to be optimistic on stock markets, particularly given lower valuations.  However, we do need to remain vigilant and the two things to keep a close eye on are the outlook for corporate earnings and the stance of the major central banks, as a deterioration in the former or a more hawkish stance of the latter is likely to give the ‘bears’ further gratification in the short term.

Panic selling into falling markets may exacerbate losses because if you intend to reinvest you may compound the problem by missing a bounce back up. It is often wise to be a spectator rather than a participant in trading at times of high volatility.

 If you would like more information, please contact us >>

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Rachel Irving <![CDATA[The Budget]]> http://www.mantlefp.com/?p=6971 2018-10-30T08:23:05Z 2018-10-30T08:23:05Z The effects on financial planning

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Budget 2018 – A quick summary of what it means for your financial planning

With no significant tax or pension changes in yesterday’s Budget, we can all now plan for the tax year ahead with confidence:

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Income tax

  • The personal allowance and higher rate threshold will increase earlier than expected to £12,500 and £50,000 respectively from April 2019. The income tax rates and bands for Scottish taxpayers will be announced in Scottish Budget on 12 December.
  • There are no other changes to income tax bands or allowances.

Pensions

  • The pension lifetime allowance (LTA) will rise to £1,055,000 from April 2019.
  • Reassuringly, there are no changes to pension annual allowances (AA). The standard AA remains at £40,000, the money purchase AA stays at £4,000 (with no carry forward) and there are no changes to the high income AA taper rules.

Capital gains tax

  • The capital gains tax allowance will increase by £300 to £12,000 from April 2019.
  • There is no change to the Entrepreneur Relief rate of 10%.

Inheritance tax (IHT)

  • As expected, the IHT nil rate band will remain frozen at £325,000 until April 2021.
  • The residence nil rate band will increase as expected from £125,000 to £150,000 from April 2019, allowing some couples to leave up to £950,000 to future generations free of IHT.

Trust taxation

  • There will be a consultation to consider the simplification and fairness of trust taxation.
  • The existing IHT regime for trusts is notoriously complex and any attempt to simplify it is extremely welcome. Removing the complexity of trust tax charges would allow us to concentrate more on the benefits of a trust.

ISAs

  • Annual ISA limits stay at £20,000 per person, with no reduction in the range of ISA options available to meet different needs.

If you would like more information, please contact us >>

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Investment Committee <![CDATA[Weekly Market Update]]> http://www.mantlefp.com/?p=6963 2018-10-29T14:29:14Z 2018-10-29T07:00:25Z Global confidence took a further downward step last week as panic selling continued...

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Global confidence took a further downward step last week as panic selling continued. Weaker than expected corporate earnings was one such catalyst while positive US data reinforcing the US Federal Reserve’s direction of travel on interest rates was another.

Third quarter results from Amazon and Alphabet were disappointing. Until recently, the technology sector seemed to have a degree of immunity to anaemic sentiment about global growth. However, fears about the corporate profits and continuing global trade tensions has rocked investor sentiment. Since its peak on October 3, the Nasdaq Composite Index has now fallen by around 9 per cent. The global sell-off also resulted in Brent crude oil dipping below $76, with fear and anxiety about the global economy proving to play a bigger role in the oil price than the fundamentals of supply and demand.

The US economy slowed less than expected in the third quarter, with GDP rising 3.5 per cent year-on-year, above expectations. Investors have become increasingly concerned that most major central banks will continue to wind down their crisis-era stimulus programmes despite signs economies outside the US are slowing with mounting trade tensions threatening to do further damage.

The European Central Bank (ECB) left its interest rates and its forward guidance unchanged for a third consecutive policy session. The bank also confirmed that its asset purchase programme would end in December. The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2 per cent over the medium term.

The European Commission demanded changes to Italy’s budget as it expressed concerns about the impact of higher spending on already high levels of debt in the country. Italy’s governing populist parties have vowed to push ahead with campaign promises including a minimum income for the unemployed. The country now has three weeks to submit a new, draft budget to Brussels.

Brazilian Jair Bolsonaro clinched victory in presidential elections on Sunday, ushering in the first far-right administration in Latin America’s largest country since its military dictatorship ended more than three decades ago. The promises of economic reform will face challenges in a country that is still struggling to emerge from recession and dealing with a Congress that is divided among 30 parties, and the large mass of the electorate that did not vote.

If you would like more information on the above article or advice on your personal financial circumstances, please contact us >>

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Investment Committee <![CDATA[Weekly Market Update]]> http://www.mantlefp.com/?p=6960 2018-10-31T09:29:12Z 2018-10-22T07:00:00Z Global developed markets mounted a recovery at the beginning of last week...

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Global developed markets mounted a recovery at the beginning of last week. Strong US company earnings played a major role, with around 90 per cent of companies beating analyst estimates. However, it was geopolitics that was the main focus. China reported its slowest quarterly growth in a decade and there was much controversy after Saudi Arabia was accused of murdering a dissident journalist.

The S&P 500 oscillated furiously after the release of the Fed’s September meeting minutes. Policymakers showed agreement on the September hike in defiance of sharp criticism from US President Donald Trump. There was general anticipation that further gradual increases would be consistent with the economic expansion, labour market strength, and firm inflation that most forecast.

There was however some criticism over Donald Trump’s tax cuts, as the US deficit has soared 17 per cent to $779 billion in the year to April 2018. This is the highest level since 2012. Corporate tax receipts fell 22 per cent and spending rose 3 per cent. As a result, the president said he had instructed federal department heads to slash 5 per cent from their budgets next year.

In the UK, inflation dropped further than expected with the consumer price index falling to 2.4 per cent in September, from 2.7 per cent the previous month. However, wages were reported to have grown at their fastest pace since the global financial crisis. For the three months to the end of August, wage growth came in at 3.1 per cent. The pound strengthened on the news, although this initially constrained the FTSE 100’s participation in the developed-market rally.

But as so often recently, the pound fell back after the Brexit talks reached a fresh impasse. The UK and the European Union have been struggling to find a way forward on the Irish border question, putting the prospect of an exit deal at risk. Meanwhile, Theresa May faces growing criticism at home for her handling of the negotiations. Her suggestion that a longer transition period could be adopted met widespread hostility among politicians from all sides.

In China, the economy grew by 6.5 per cent in the third quarter, the slowest rate since the depths of the financial crisis in the first quarter of 2009. News that unreported Chinese local government debt may amount to trillions of US dollars spooked investors and the Shanghai Stock Exchange extended previous losses.

Many other emerging markets were also weak, but Brazil bucked the trend as hopes that Jair Bolsonsaro, the right-wing candidate, would win the final round of the presidential election on 28 October. Although Bolsonaro is a controversial figure, his economic policies are seen as market-friendly.

Finally, rating agency Moody’s announced that it cut Italy’s debt rating by only one notch, leaving it above junk status. This result was better than feared providing some short-term relief to falling bond prices. However, Italy’s deputy prime minister Luigi Di Maio has insisted that the government has no plans to change its budget blueprint, which will likely hinder any positive momentum from the rally, as they battle with Brussels over their budgetary plans.

If you would like more information on the above article or advice on your personal financial circumstances, please contact us >>

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Colin Caulfield <![CDATA[State Pension Increase For Next Year]]> http://www.mantlefp.com/?p=6956 2018-10-17T11:30:27Z 2018-10-17T11:30:27Z September inflation figures announced

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The state pension is set to increase by 2.6 per cent from April next year after inflation fell more than expected in September.

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Office for National Statistics data published today shows the Consumer Prices Index inflation stood at 2.4 per cent in September – the month used to set inflation increases.

The index is used for the state pension triple-lock uprating that guarantees the basic state pension will rise by a minimum of either 2.5 per cent, the rate of inflation or average earnings growth, whichever is largest.

This means the annual flat-rate state pension will rise in value by £221 from £8,546 this year to £8,767 from April 2019.

The pension lifetime allowance will increase in line with September’s CPI inflation figure, meaning it will rise by £24,720 to £1,054,720 next year.

AJ Bell senior analyst Tom Selby says: “Today’s figures will provide a welcome income boost to millions of people currently in receipt of the state pension. Those who get the flat-rate amount will see their annual payment increase by over £220 in April next year. With inflation returning to the economy, the value of protection against rising prices is not to be underestimated.”

He adds: “In the context of the triple-lock, it’s worth noting the guarantee will cost the government nothing compared to the earnings and inflation ‘double-lock’ some have proposed. It is only in a low inflation, low earnings environment that the promise begins to bite.”

If you would like more information on end of year tax planning opportunities centred on your personal circumstances, please contact us >>

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Vishal Nair <![CDATA[Ride Out October Storms]]> http://www.mantlefp.com/?p=6950 2018-10-15T13:57:41Z 2018-10-16T10:23:48Z Last week showed October can be painful for investors

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Ian Cowie reports in The Times online that October is one of the peculiarly dangerous months for stock market investors. However, as Mark Twain said more than a century ago the others are July, January, September, April, November, May, March, June, December, August and February.

Since the author went bankrupt, share prices have fallen sharply in October in 1929, 1987 and 2008.

Nobody knows why this is often a bad month for shares, but maybe it has something to do with traders feeling fed up after summer holidays and sad before winter! Last week fears of trade wars, higher interest rates and Brexit uncertainty were specific catalysts to force the FTSE 100 index down to a six-month low. Many smaller companies suffered even bigger falls and in America stocks plummeted.

At times like these, it may pay to remember that shares reflecting the changing composition of the London Stock Exchange delivered higher returns than cash over three-quarters of all periods of five consecutive years since 1899.

In plain English, that means if investors could hang on for five years, they had a 75% chance of beating bank deposits, according to comprehensive analysis in this year’s Barclays Equity Gilt Study. Despite much worse setbacks than the current crisis — such as the Great Depression and two world wars — shareholders who remained invested for a decade had a 90% probability of beating deposits.

It makes sense to have a clear idea of what you hope to achieve by investing and how long you are prepared to wait to do so. That can provide a degree of certainty during periods of extreme anxiety.

At Mantles, we believe it is impossible to time the markets (remember it’s not only timing coming out but also importantly when you go back in) and we are advising clients to sit tight and ride out October’s stock market storms. As the saying goes, it’s better to have time in the markets rather than trying to time the market.

If you would like to discuss investment planning, please contact us >>

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Investment Committee <![CDATA[Weekly Market Update]]> http://www.mantlefp.com/?p=6954 2018-10-16T07:38:10Z 2018-10-15T07:00:12Z Last week we witnessed a sell off across global markets...

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Last week we witnessed a sell off across global markets, sparked by rising US bond yields and positive comments from the US Federal Reserve surrounding the continuation of higher interest rates. These worries soon escalated to include trade wars, rising inflation and high stock valuations. Concern quickly turned to panic causing investors to sell stocks indiscriminately.

Amongst those impacted were large technology stocks that have led the US market’s charge in 2018. Amazon, Google and Facebook came under heavy selling pressure, as investors assessed the higher costs they may face from higher wages and greater security requirements after recent data-theft scandals.

Fundamentally, the global economy remain robust and company earnings continue to deliver. Inflation remains under control, liquidity conditions are supportive and central banks will continue to do whatever necessary to support growth through the cycle. Ultimately investors have overacted to negative news flow and this has created some short-term panic. This is simply taking some air out of the system so that markets do not overheat in the longer run.

Although it is likely in the coming days that market behaviour will calm down and investors will start to focus once again on the positive fundamentals, most corrections take some time to complete and this would be a very mild one if it is already over. So, it is possible there is some further equity weakness and then some consolidation before the bull market resumes once again. It’s likely that Trump will not step back anytime soon from pressuring China and that the Fed will not stop tightening policy unless things get materially worse.

Elsewhere, concerns about the Trump administration’s trade war mounted after the International Monetary Fund (IMF) said a full-blown war could trim 0.8 per cent off global growth in 2020, a move that would impact corporate earnings. While growth was cut in US and China, they predicted that UK growth would expand this year and next but warned that a no-deal Brexit remained a risk. The IMF also issued a warning to the Italian government over its budget plans and said the country should shrink the country’s deficit in accordance with the EU plan rather that increasing it.

If you would like more information on the above article or advice on your personal financial circumstances, please contact us >>

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