Monthly Archives

March 2022

“Stealth taxes” to watch in 2022

By | Financial Planning

In 2022, many households face greater financial pressure as living costs rise. However, less well known is a set of “stealth taxes” that could erode your wealth without careful planning. Below, our team at WMM shares six of these to be aware of in the coming months – together with ideas to address them with your financial planner. 


Five-year income tax freeze

Chancellor Rishi Sunak announced in the 2021 Spring Budget that income tax (together with others like capital gains tax and inheritance tax) will be frozen for four years from 2022/23 to 2025/26. Some projections suggest that this could, eventually, push 1.2m people into the 40% higher rate threshold as average UK wages steadily rise.

A range of options can be used to mitigate the impact on your finances. One idea might be to increase your pension contributions, as these receive tax relief at your highest income tax rate.


State Pension rise cap

In normal times (under the “triple lock” system), the State Pension rises each financial year in line with inflation, 2.5% or in line with the National Average Earnings Index (NAEI) – whichever is highest. However, after an 8.8% increase in earnings last year, this formula was suspended. Instead, the State Pension is set to rise by 3.1% in April. This is below the current 5.5% rate recorded by the Bank of England (BoE), and lower than the 7.25% rate projected in the spring.

Here, you may need to discuss your strategy with a financial planner. It might be that you need to lean more heavily on other income sources to fund your retirement in the short term (e.g. ISA savings). Alternatively, you may need to revisit your budget.


Child benefit loss

For parents with two children child benefit can be worth up to £2,000 per year. Once you or your partner starts earning over £50,000 per year, however, you may need to start paying some of this back (via a levy called the “High Income Child Benefit Tax Charge”).

This threshold has been frozen since 2013 and is set to continue as frozen in April 2022. This means about 1.6m families could lose their child benefit – including 120,000 families on the basic rate – as higher inflation and wage growth occurs across the country.

Again, this might mean revisiting your financial plan as a family, to prepare. For some, it might form another reason for a child-caring partner to return to full-time work (now that the children are older). Others may need to re-examine their budget.

Whatever you do, be careful not to simply avoid claiming child benefit (to avoid the hassle of repaying). Claiming can help you build up your State Pension via National Insurance credits.


Pensions lifetime allowance freeze

The lifetime allowance (LTA) is the maximum you can hold in your pension(s) before facing extra tax charges, and this has been frozen at £1,073,100 until April 2026. The annual allowance – which caps yearly pension contributions at £40,000 – will also remain frozen.

With inflation going up, many expected the LTA to rise to account for the rising cost of living. Yet the Chancellor has said he is pursuing this route as an alternative to raising income tax, VAT or National Insurance. This means that retirement savers need to be extra careful, planning so that they do not inadvertently breach the threshold.

Doctors and high-earning public sector workers, for instance, may be particularly at risk. Here, you can explore options such as “de-risking” your retirement portfolio strategy, if you still have some years ahead of you until retirement and you are nearing the LTA. Another idea is to make use of other tax-efficient investment vehicles, such as a Stocks & Shares ISA or a VCT.



Interested in finding out how we can optimise your financial plan and investment strategy? Get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM. 

You can call us on 01869 331469 


This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxfordshire).


Keep your pension growing through career changes

By | Retirement Planning

Did you know that UK workers change jobs every 5 years, on average, according to research by LV? A career change is often a great decision, but it can cost you in retirement if you are not careful. It can take as long as three months to get enrolled on the company pension scheme when you start a new role. In that time, many people do not make pension contributions – which can add up to £1,000s lost once you reach your late 60s. At WMM, we offer this short guide to help you navigate job changes without compromising your retirement goals.


Keep track of National Insurance

Your State Pension is based on your National Insurance (NI) record. At least 35 “qualifying years” are needed to get the full new State Pension once you reach your State Pension age. In 2021-22, this amounts to £179.60 per week – or £9,339.20 per year – so it is worth building the best record you can.

Most people will automatically pay NI contributions via their employer, deducted from your wages via the PAYE system. When you change jobs, therefore, your new payslip should reflect this. Yet it is not unheard of for administrative mistakes to be made. Always check payslips – especially if you start a new role – and cross-check the deductions against your NI record

If you have just started out on your own as self-employed, make sure you pay your NI correctly via your Self Assessment tax return ahead of the deadline.


Start a personal pension

A personal (or “private”) pension can be a great way to “take your pension with you” when you change jobs, as it is not tied to any employer. The disadvantages are that you need to manage the pension yourself, and you may not receive any employer contributions to it. 

However, it does mean that, in the first 2-3 months of a new role (when you may be waiting to enrol on your workplace scheme), you still have a pension to contribute to. It could also be a useful place to transfer funds from old workplace schemes into. This can help you avoid trying to manage too many old workplace pension pots leading up to retirement.

Be careful not to assume that any loss in pension contributions will be compensated for with a higher salary, when you move jobs. This may not be the case, and it would also be a shame to miss out on the compound interest growth you may have achieved with those extra months of pension contributions. If you have not yet started a private pension, then our team here at WMM would be happy to speak with you about your retirement plans. This can be a great opportunity to not only make your retirement more robust to career change, but could also help you reduce investment fees and increase your real returns through better strategy.



Interested in finding out how we can optimise your financial plan and investment strategy? Get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM. 

You can call us on 01869 331469 


This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxfordshire).


Should I overpay my mortgage, or invest?

By | Investment Planning

We have all been through unusual times lately, with COVID-19 since 2020, rising inflation and now conflict in Ukraine. These – and other – events are having knock-on effects onto the wider economy and markets. Under “normal” times, the “invest vs overpay mortgage” debate is an interesting one – but has this new landscape changed things? Below, we address this question in light of recent trends and developments.


Putting excess cash to work

Interest rates on cash savings accounts have been at historic lows for some time now. It is hard to beat 1% on easy-access, for instance. Those with spare cash, therefore, typically have two other options: repay debts or invest. The first is almost always worth prioritising if the debt has a high interest rate, such as personal loans and credit cards. However, with a mortgage, it is not always clear whether the savings you’d make from overpaying would beat the returns you could get from investing. Here, you need to factor in the prevailing economic environment.


Overpaying vs. investing in 2022

The main incentive to overpaying your mortgage is that you repay the debt faster, meaning that you can own your home outright, faster. If this is your primary goal (rather than building wealth), then this is understandable. For those whose main objective is to grow their wealth, however, the question of overpaying vs investing relies heavily on interest rates and inflation.

In recent years, mortgage rates have been historically very low. In fact, in 2021 some lenders were even offering sub-1% deals to certain customers. This means less interest for borrowers to repay over the mortgage lifetime. Overpaying on such a deal would likely be far less optimal compared to investing, where annual average real returns of 5% – or more – should be realistic.

Lately however, mortgage deals have been getting more expensive. This is mainly due to the Bank of England (BoE) raising its base rate, twice (from 0.10% to 0.25% in late 2021, then up to 0.5% in early 2022 and more recently up to 0.75%). Since lenders set their rates above the base rate, this has already led to several deals getting pulled from the market. 

The average 2-year fixed loan now sits at 2.65%. For a 5-year deal, the interest sits closer to 2.88%. For many investors, it may now be more of a toss-up between overpaying the mortgage and investing – especially for those with a more cautious risk appetite (leading to a preference for assets with a relatively safe, but low, level of return – like bonds).


Wider questions to consider

Here, it is important to remember that you do not necessarily have to choose between investing and overpaying a mortgage. It is often possible to do both. Yet it helps to ask yourself: “Why do I want to invest?”, and “Why should I overpay my mortgage?” This can help you shed light on the right course for your financial plan.

First of all, check whether you can overpay your mortgage. Some lenders may not let you, and most put a cap (e.g. 10%) on how much you can overpay. Those on a standard variable rate (SVR) can usually overpay as much as they like, but SVRs are usually more costly than fixed rate deals. Secondly, consider the horizon in front of you. How long do you have to invest until you might need the money (e.g. during retirement)? How many years until your mortgage is paid without making extra payments?

For instance, if you are near your mortgage end, then the advantages of overpaying usually go down. This is because interest forms a lower proportion of your monthly repayments. As a rule, therefore, it is usually better to overpay a mortgage earlier in its lifetime. Moreover, if you only have, say, 5 years to invest, then you may need to focus on lower-risk assets which offer lower potential returns. 



Interested in finding out how we can optimise your financial plan and investment strategy? Get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM. 

You can call us on 01869 331469 


This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxfordshire).


Ukraine: how war can affect investments

By | Investment Planning

Recent events in Ukraine have brought widespread shock – including in the markets, which initially dipped after hearing about the Russian invasion. The 24/7 media coverage often focuses on the increased short term volatility, of companies, stocks, bonds or commodities, which is the result of new information arising which impacts prices, until ‘new’ news brings about further adjustment. At times like this, we strongly encourage you to stick with your long-term financial planning strategy, and trust markets to work on your behalf. Avoid making short-term investment decisions, as volatility is always in the markets.

As a form of context, below we look at some historical examples of how markets react to war, and whether this affects the longer term growth trend.


What is happening in Ukraine?

Events are moving quickly in the region. At the time of writing, Russia had invaded Ukraine 13 days prior – receiving widespread international condemnation. At least 2m refugees have fled so far, and Ukrainian forces have put up fierce resistance despite being hugely outnumbered. 

The US, UK and EU have responded with heavy sanctions on Russia, which has refused to open its stock market. Both US and UK imports of Russian oil have now been banned, leading to further global rises in energy prices as supply struggles to meet demand. 

So far, the invasion has not sparked a sustained dip in global stock markets – although it is adding to existing inflationary pressures in the Western World.


Historical precedence

The impact of war on stock markets is not universal. It is complex and varies depending on the players, motives and actions concerned. The Swiss Finance Institute, for instance, published research on the US stock market since WWII and found that stock markets tend to fall in the “pre-war” phase (when uncertainty about the conflict prevails), but usually rise once war breaks out. The explanation is unclear, but perhaps partly this is because war typically creates the new, defining narrative for a nation, its markets and investors. 

Wars can bring short-term “shocks” to markets. The S&P 500 fell -3.8% in one day after the Pearl Harbor attack in 1941, and the North Korean invasion of the South in 1950 led to a -5.4% one-day fall. However, most of these shocks tend to recover well within a year.


The Russo-Ukraine conflict and your financial plan

Russia is the world’s 3rd biggest exporter of oil and the 2nd biggest supplier of natural gas. Any sanctions, therefore, are likely to drive up global energy prices. Already, in the UK we are facing higher inflation, so this plausibly means higher fuel and utility bills in 2022. Moreover, Russia provides 35% of the world’s palladium and 9% of its platinum. These precious metals are used in cars for catalytic converters. So, sectors such as the automotive industry (where we have already seen high inflation) could see further price increases for customers due to more limited supply. 

With all this said, be careful not to try and “time” commodity markets or build your investment strategy around conflicts (since their effects on markets are typically short-lived). Consider, for instance, that during the US War in Afghanistan (2001-2021) markets were volatile but those who committed to an S&P 500 index fund may have seen returns as high as 300% in that time (averaging 15% gains per year).  

Currently, oil and gold prices are soaring and many investors are tempted to take advantage. However, prices are moving constantly and things may take a sharp turn at any moment. Be vigilant to stick to your long-term strategy agreed with your financial planner, rather than taking needless risks with your investments. Remember, frequent active buying and selling in your portfolio can ramp up fees and has not been proven to increase returns compared to focusing on a “buy and hold” strategy.


The current conflict in Ukraine is coming at a humanitarian cost. It is also having big repercussions for the global economy. We all hope for a swift and peaceful resolution and it has been truly inspiring to see the efforts of every day people, charities and aid organisations.

Markets have been through many conflict-related events in the past such as the Cuban Missile Crisis, the 2003 Iraq War and the Arab Spring (2011). In the long term, growth is the long term trend. There is no reason to suggest the current conflict – although deeply distressing – in terms of the markets, is any different. 

This content is for information purposes only. It should not be taken as financial or investment advice.