Essential spending continues to rise

Essential spending continues to risePrice inflation appears to be on the rise, with the cost of food and drink causing essential household spending to grow.

The latest Lloyds Bank Spending Power Report has found the biggest rise in food and drink expenditure for 20 months has driven essential spending to its strongest level of growth since February 2014.

The survey found that overall essential spending grew by 1% last month.

This was the third consecutive month of positive growth for essential spending.

Lloyds Bank’s analysis of its own current account data also shows that spending on groceries rose by 1.6% year-on-year – its highest rate of growth since March last year.

Higher food & drink prices are causing essential spending to rise Click to Tweet

Meanwhile fuel expenditure rose by 5.9%, recording its biggest year-on-year increase since February 2013 as prices at the pump continue to climb.

This is in stark contrast to one year ago, when spending on petrol and diesel sank by -9.3%.

With UK Consumer Price inflation rising to 1.2% in November, Lloyds Bank’s regular consumer survey, conducted in conjunction with Ipsos MORI, found that the percentage of people who have a negative view of inflation has risen by 11pp over the last 12 months, to now stand at 49%.

Meanwhile the most common expectation for CPI inflation is that it will rise to 2% over the course of 2017.

When asked about the outlook for their disposable income, almost a third (31%) of people saw themselves having less money in twelve months’ time once all household bills and essentials have been paid.

Robin Bulloch, Managing Director, Lloyds Bank said:

“2016 has been a year of sustained growth in consumer outgoings, with the steady rise in expenditure on food and fuel driving a significant increase in overall essential spending.

“But while consumer confidence has remained resilient in the face of some seismic economic and political events, it seems the prospect of increased inflation is finally starting to weigh more heavily on people’s future expectations.

“Concern around the impact this will have on customers’ spending power next year is now becoming evident.”

With many people considering their Financial Plans for 2017, an important consideration for the year ahead will be how to save money on essential spending as price inflation continues to rise.

The Bank of England has forecast inflation will rise next year, where the CPI measure of inflation is expected to reach 2.7%.

The rise in price inflation expectations is being blamed on the fall in the value of the pound since the EU referendum in June, which has driven up cost of imported goods.

As you update your Financial Plan, it is important to make reasonable assumptions about future price inflation and, at the same time, review your household spending to keep your outgoings in check.

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5 Most Read Blogs of 2016

5 most read blogs of 2016A lot has happened this year.

We’ve had Brexit, Trump and England getting kicked out the Euros by Iceland.

There has been a lot to write about so we thought that we would put together our 5 most read blog posts of 2016.

Understanding the new Personal Savings Allowance

When the new Personal Savings Allowance started in April, it meant that 95% of taxpayers would no longer pay income tax on their savings interest.

Our blog post from 7th January explained the ins and outs of the new Personal Savings Allowance and was the most read article on our website this year.

HMRC tax changes & the residential property investment market

Another popular article this year was a guest post from January, written by Jonathan Daines about tax changes for buy-to-let property investors.

Buy-to-let investors have been targeted a couple of times recently by HM Treasury, with a stamp duty increase and reductions in what they can offset against income tax bills.

Topping up your State Pension when you retire early

In October we wrote about the half a million workers retiring before state pension age who have the chance to top-up their State Pension at bargain rates during the next five years.

This was based on a handy guide from insurer Royal London which described the options for people wanting to take advantage and top-up their State Pension income.

Avoiding inheritance tax through Business Property Relief

Shelley’s article about family businesses avoiding inheritance tax was one of our most read in 2016.

It followed news of an estimated 4.6 million family businesses in the UK, making up 87% of all private sector firms.

State Pension no longer fit for purpose

Last month Nick wrote about a shortfall in National Insurance contributions to pay for State Pension income, raising questions about the future sustainability of this important retirement benefit.

The State Pension has been under attack on several occasions this year, with the ‘triple-lock’ now expected to end in 2020 and future reforms to ages and incomes very likely.

I hope you have enjoyed reading our blogs over the past year and we are very excited about what 2017 has in store.

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Weekly Round-Up – Friday 23rd December 2016

Informed Choice Weekly Round-UpHappy Friday, readers! It’s time to catch up.

Here are some of the things that we covered at Informed Choice this week.

On the blog this week

This new study revealed that Winchester is the best place to live in the UK. Do you agree?

Robo-advice appears to be failing investors, who don’t realise there is no advice and it’s not delivered by robots.

With Christmas rapidly approaching, worrying about money can be a real cause of stress.

The latest podcast episodes

Episode 150 is an interview with Claire Walsh, head of advice at Unbiased.co.uk.

In episode 151, we hear from Richard Parkin, head of pensions policy at Fidelity International.

What were the biggest personal finance events of 2016 and what can we learn from them to make better decisions in the future? We explore this in episode 152 of Informed Choice Radio.

Informed Choice in the press

It’s been the worst year for UK asset management since 2007. Martin was asked to comment about this for the FT last weekend – FT subscription needed to read the article.

Before you go

We wish you a very Merry Christmas and a Happy New Year! The Informed Choice offices are closed from lunchtime on Friday 23rd December 2016 until 9am on Monday 3rd January 2017.

There’s no email newsletter next week, but we will be back in 2017 with our weekly roundup.

 

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Winchester is the best place to live

Winchester is the best place to liveI spent one of the best years of my life living in the City of Winchester.

After giving up on academia in my second-year at sixth form college and failing to get the A-Level grades needed for a University place, I found myself instead at a local college studying for a Higher National Diploma in Business and Finance.

Towards the end of this course, with grades looking significantly healthier than during my studies for English Literature, History and Sociology, I discovered the option to spend a year at University to gain an honours degree in Business Administration.

The number of Universities offering this ‘top-up’ option to academically challenged polytechnic students was limited, but King Alfred’s College in Winchester seemed to fit the bill.

At just over an hour from home, I had the opportunity to enjoy the three year University experience in the space of an academic year.

Based on that year spent living in Winchester, and many visits to the City since, it was little surprise to learn that it has been named the best place to live in the UK.

The local authority district of Winchester (which includes the City of Winchester) scooped the top spot based on residents’ health and life expectancy, employment and earnings, and high scores in personal well-being surveys.

People who live in Winchester also have access to a good number of leisure facilities for socialising and downtime.

According to Halifax, the Orkney Islands have taken second place, followed by Wychavon in Worcestershire, Derbyshire Dales and Hambleton in North Yorkshire.

There are plenty of good reasons why Wintonians have the best quality of life in the UK:

-The employment rate, at 83.1%, is significantly higher than the national average (73.7%), while gross weekly earnings of £824 are 27% higher than the UK average (£646)

-A high proportion (96.6%) of residents report being in good or fairly good health compared to a national average of 94.6%

-Life expectancy for men is higher than the UK average (79.5 years) at 82 years. Whilst the women of Winchester live more than two years longer than in the rest of the UK (85.3 years against 83.2 years)

-Crime rates are among the lowest in the country, with a burglary rate of 11.5 per 10,000 people compared to an average of 28.7 for the rest of the UK.

-Latest ONS figures indicate the Winchester adult population is among the happiest, satisfied, content and the least anxious in the UK scoring highly in the Personal Well-Being Survey with a top 30 ranking in each category.

-Moreover, in their leisure time they have a good number of pubs – 12 per 10,000 adults – and health and leisure facilities – two per 10,000 adults, above the national average of 10.1 and 1.4 respectively.

These are all good reasons to choose to live in a particular location.

I’ve not lived in Winchester for 16 years, but I can’t complain about living here in Cranleigh.

Earlier this year, the borough of Waverley (which includes Cranleigh, Godalming, Farnham and Haslemere) once again came out on top of a national poll looking at the UK’s prosperity and happiness.

This was made official by the Legatum Institute in their UK-only Prosperity Index, ranking the regions of the UK by their level of prosperity.

The study looked at economic quality, business environment, education, health, safety and security, social capital, and natural environment.

Based on these important factors, Cranleigh and Waverley comes out at the top of the list.

What factors did you consider when choosing where to live? Have you incorporated the best places in the country to live when considering your Financial Planning?

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Robo-advice is failing investors

Robo-advice is failing investorsRobo-advice. Possibly the least accurate title the world of financial services has created in recent memory. After all, there are no robots and there is no advice.

Regardless of what we call it (execution-only investment? investor directed platforms?), it is becoming clear that robo-advice is failing investors.

The Financial Services Consumer Panel has published research and a position paper on the consumer experience with online investment and advice services, which are often called robo-advice.

The research was carried out for the Financial Services Consumer Panel by Boring Money.

It concluded that many online investment firms failed to:

-Communicate clearly whether they were providing regulated advice or guidance;

-Disclose costs and charges in a way that allowed consumers to understand how much they would be paying and for what;

-State clearly whether consumers would have recourse to the Financial Ombudsman Service (FOS) or the Financial Services Compensation Scheme (FSCS) should things go wrong;

-Use language that consumers understood.

Robo-advice. There are no robots and it's not advice. Click to Tweet

The research also found that consumers in the sample did not understand the difference between regulated advice and guidance.

This is an important distinction, because regulated advice comes with lots of consumer protection, whereas the provision of information or guidance does not, leaving responsibility for the action taken in the hands of the investor.

In order to address these shortcomings from robo-advice, the Financial Services Consumer Panel has made a series of suggestions, recommending that:

-The FCA clarifies and enforces strongly existing rules designed to address the problems identified in the research, whether or not regulated advice is being provided;

-The FCA leads an industry and consumer working group to develop simpler, more consumer friendly, language to be used consistently across the sector; and

-The FCA should ensure firms quoting all-in fees are complying with the current rules on costs and charges.

Sue Lewis, Consumer Panel Chair said:

“More and more people with relatively small amounts of money to invest are turning to online investment services, many of them with cash they have released under pensions freedoms.

“They need to know exactly what they are buying, what it costs, and what happens if something goes wrong.

“Most online firms are not giving them this information clearly, most of the time. It is obvious these firms do not have a clue how to communicate in a way their customers understand.

“The FCA should enforce its rules in this area vigorously, whether firms are giving regulated advice or not, before more people who can ill afford it lose out.”

If you are using robo-advice, then make sure you understand its limitation and risks.

There is a place for online investment services which allow investors to make their own decisions with their money.

What we would like to see is more clarity when it comes to the way investors using these services are treated, and possibly a better name for the service which doesn’t mislead its users.

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Don’t let money worries ruin Christmas

Don't let money worries ruin ChristmasWith Christmas rapidly approaching, worrying about money can be a real cause of stress.

New research has confirmed it is the biggest cause of stress for adults in the UK and can be detrimental to overall wellbeing.

The research from Central YMCA found a 52% divide between the most and least financially confident people in the country.

Other factors significantly impacting wellbeing include the quality of personal relationships and mental stimulation.

These factors are causing 50% and 48% swings in wellbeing scores respectively.

The report from leading health and wellbeing charity, Central YMCA, surveyed a nationally representative sample of 1,000 UK adults and uncovered that financial woes reduce overall wellbeing scores by a third.

In total, the average Brit scored 6.13/10 on an index for their overall wellbeing.

Don't let money worries ruin Christmas. Take control over your financial planning. Click to Tweet

According to the research, the average Brit spends roughly half their monthly pay on presents at this time of year.

They also reported that one in three UK adults regret how much they spend over Christmas, while up to a fifth are left suffering financially for three months or more.

Commenting on the findings, Rosi Prescott, chief executive at Central YMCA, said:

“As we move into what is both an expensive and stressful time of year, it’s likely that money worries will be heightened over the Christmas period.

“The financial stresses felt by people right across the country are symptomatic of the ever-growing financial inequality in the UK, and these worries and woes are enormously damaging to our overall wellbeing – affecting how we feel about ourselves and our lives.

“At this time of year, it’s important we try to strive towards a healthy balance of mental stimulation, physical activity and positive relationships – all which deliver a significant boost to how we feel about ourselves.

“Christmas should be seen as an opportunity to improve our wellbeing – reconnecting with relatives and friends, where we can, and encouraging those positive and healthy relationships.”

A lot of things can cause stress and reduce our overall wellbeing, but money doesn’t need to one of them.

An important part of the service we offer clients is removing stress about money by offering a clear explanation of your choices and options.

If taking control over your personal finances and reducing worries about money are your goals in 2017, please do get in touch.

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Weekly Round-Up – Friday 16th December 2016

Informed Choice Weekly RoundupHappy Friday, readers! It’s time to catch up.

Here are some of the things that we covered at Informed Choice this week.

On the blog this week

Closed-book customers are more likely to be fairly treated with the publication of new FCA guidance.

2016 has been a particularly interesting and challenging year, but here at Informed Choice it’s been a good year. We asked the Informed team to share some of their highlights.

Almost half of us have an “Ostrich mentality” about retirement savings, according to new research.

While many of us have a target age at which we would like to retire, nearly two in five of today’s retirees where forced to stop working early. What does this mean for retirement planning?

The latest podcast episodes

In episode 147, Martin speaks to Angela Sherman from Care to be Different about who pays for long-term care, the lack of awareness surrounding NHS Continuing Healthcare, and how serious your health needs to be in order to qualify for NHS funding.

Episode 148 of Informed Choice Radio includes a special guest appearance from Apprentice star and Countdown host Nick Hewer. Martin also speaks to Darren Cooke about his successful petition to ban pensions cold calling.

In the latest episode, we look at some of the most pressing money matters this Christmas, including returning unwanted gifts and the cost of insuring Santa.

Informed Choice in the press

In this article from FE Trustnet, we comment on the sector-topping global funds that aren’t afraid to stray from the index.

Before you go

Our office is open until lunchtime next Friday, 23rd December, before closing for the Christmas break. We then reopen at 9am on Tuesday 3rd January 2017.

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Being forced to retire early

Being forced to retire early“I don’t need a plan for retirement, I’m just going to keep on working.”

That’s the extent of a ‘retirement plan’ from a growing number of people, who view the ability to work forever as an alternative to saving for later life.

With longer life expectancy, lower investment returns and a rising cost of living, it’s little surprise the thought of saving enough for retirement can seem daunting.

According to the latest Golden Age of Retirement Report from Aegon, while many of us have a target age at which we would like to retire, nearly two in five of today’s retirees where forced to stop working early.

This was the result of ill health, becoming physically unable to work, or redundancy.

Any of these factors can force an earlier than expected retirement, especially if the plan was to continue working in later life, and have serious consequences for income in retirement.

The findings from Aegon were published at the same time as encouragement from the UK’s Chief Medical Officer, Dame Sally Davies, for individuals to remain in work beyond traditional retirement ages.

Aegon’s research shows that not everyone has the option to continue working in retirement.

The findings also have important implications for the review of state pension ages John Cridland is currently undertaking for the Government.

According to the research, people in the UK hope to retire at an average age of 64.

The pension provider argues that this target retirement age needs to be considered against the backdrop of an increasing state pension age, creating a need to fill the gap between retirement and the receipt of this income.

Retirement has undoubtedly changed in recent years, more often now resulting in a gradual transition between full time work and full time retirement.

In addition to the financial benefits of continuing to work in later life, there are other benefits too.

Remaining socially, physically or mentally active in retirement can all be beneficial for your health.

Steven Cameron, Pensions Director at Aegon said:

“With the concept of a fixed retirement date fast disappearing, people no longer excitedly count down the days until they receive their gold watch or carriage clock.

“Indeed, an increasing number relish the opportunity to stay actively in work. The changing nature of work, attitudes towards retirement and greater pressures on income mean there’s no set pattern to retirement any more.

“The decline of generous final salary pension schemes, and the upswing in pension freedoms, means there is a greater onus on individuals to put enough money aside for retirement.

“Planning is key, and advisers are well placed to make sure those forced out of work earlier, as well as the 12% who retired later than anticipated, can optimise their retirement finances accordingly.”

If you’re thinking about making plans for your retirement, do give us a call. We can help you understand what it will take to secure the life you want in retirement.

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“Ostrich mentality” about retirement savings

“Ostrich mentality” about retirement savingsAlmost half of us have an “Ostrich mentality” about retirement savings, according to new research.

The Skipton Building Society Retirement Tracker found millions are significantly underprepared for retirement as a result.

The research grouped over 6,000 UK consumers into one of five distinct categories, according to their retirement savings behaviours, how much they are allocating towards future retirement needs, and their household income.

These five categories are Wise Owls, Squirrel Savers, Money Moles, Savings Snails or the Ostrich mentality.

48% were found to fall into the ‘Ostrich mentality’ category when it comes to saving for their retirement.

Individuals in this category were either not saving for their retirement or were falling short of the amount needed to secure the incomes they needed in later life, with nothing saved in addition to their State Pension.

When asked why they weren’t saving appropriately for the future, two-thirds of the Ostrich category admitted they choose not to save because of affordability.

However, of those with savings that are currently falling short, 38% believe they’ll be nowhere near their savings target by the time they retire.

According to the research, more than half of non-retirees have failed to save anything towards funding their retirement.

Nearly half admitted they have no idea how much they need.

Only 6% of the group surveyed were found to be in the “Wise Owls” category, tending towards having a more sophisticated portfolio with a broad range of savings and investments.

Nearly half of the Wise Owls group are saving to fund their retirement through a Cash ISA, over one third through a personal pension, and nearly a third through stocks and shares investments.

This group are the most likely to use cash savings to fund their retirement.

Across the rest of the UK, Skipton’s data shows that it is a mixed picture when it comes to retirement saver types.

Only 6% of the sample are classed as Squirrel Savers, meaning that they are on track to meet or exceed their savings but have a less sophisticated portfolio in comparison to the Wise Owl group.

The majority of this group are relying more on their company pension to fund their retirement than other investment and savings options.

21% of non-retired people are classified as Money Moles, which shows that they are saving without a set target but have at least one of the following to support them – a company pension, Cash ISA or are over paying their mortgage.

Only two in five Money Moles have sought financial advice.

Just one in five were categorised as Savings Snails.

This group is the most likely to talk to their friends and family for advice (18% compared to 7% of Ostriches).

They tend to save more than those with an Ostrich mentality but 35% think they’ll be quite far off saving their target amount.

In reality, 20% of this group are not saving any part of their annual household income to fund their retirement.

Are you on track to save enough for the life you want in retirement? Do you fall into the Ostrich mentality or Wise Owl group? When was the last time you spoke to a financial adviser about your retirement plans?

 

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Informed Choice 2016 Highlights Video

Brexit, the election of Donald Trump, the death of so many loved celebrities; 2016 has been a particularly interesting and challenging year, but here at Informed Choice it’s been a good year.

We asked the Informed team to share some of their highlights.

Nick was pleased to see his beloved football team, Bristol Rovers, receive promotion to the First Division in the final game of the season.

From a business perspective, he’s pleased about the team we have built at Informed Choice and how are apply that team-based approach to our many loyal, existing clients.

Shelley shares one of her highlights; being promoted to Financial Planning Director at Informed Choice and getting to meet interesting clients.

Andy Bodman talks about the market response to Brexit and US Presidential election, our sponsorship of the Cranleigh Chamber of Commerce Brexit debate, giving out miniature Christmas trees.

Andy’s highlight of the year was being involved with Cranleigh in Bloom and winning Gold for Cranleigh at the South & South East in Bloom Awards.

Kelvin was pleased to pass exams and obtain the QCF Level 4 qualification, enabling him to join the Informed Choice team as a Paraplanner.

Victoria attended an event at the House of Commons, hosted by Jonathan Edwards MP, about UK financial services education and engagement.

Matt spoke about Informed Choice’s sponsorship of the fifth annual Jigsaw Run 10k, which raised more than £7,500 for Jigsaw Trust.

Lizanne’s highlight was the Informed Choice summer BBQ, celebrating our 22nd birthday.

Martin spoke about winning the Toast of Surrey Business Awards in the category businesses with turnover up to £1m, and also our podcast, Informed Choice Radio, which celebrated its second birthday in November and some of the incredible guests we interviewed throughout the year.

What was your highlight from 2016 and what you are looking forward to happening in 2017?

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