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Jan 18
0

How can you pick this year’s winners?

By | Investment Planning

With a new year underway and the cost of living continuing to increase at a pace, and the knock-on effect of this to most services and products, investors are understandably looking for ways to ensure they capture the best investment returns where possible. But where should you start with this?

Can you use historic performance to predict future performance?

Many investors still attempt to chase the best performing countries, sectors and funds, selling assets that have fallen out of favour and buying the newly touted ‘best buys’, often based on historic performance.

Many professional investors and fund managers believe they have the ‘skill’ to do this.

However, whilst there are lessons that can and should be learned from historic data, many decades of academic research show that the manager’s ‘skill’ is more often likely to be ‘luck’, and that repeat ‘luck’ is almost unheard of.

Dimensional Fund Advisors have compiled the following chart, showing the Randomness of Returns. The chart focuses on the performance of global markets, by country, since 2001.

Randomness of Global Stock Market Returns


Source: Dimensional Fund Advisors, Randomness of Global Stock Market Returns

This chart demonstrates, clearly and colourfully, that it is very hard to predict which country will outperform from one year to the next, taking Austria as an example – they produced the highest developed market return in 2017, but the lowest in 2018.

Similarly, markets have returned on average about 10% a year, although almost never that amount in any given year. So, like trying to pick the winning country, asset or company, we don’t advocate trying to predict or outsmart (i.e. time) the market.

So, how should investors deal with this?

Our investment philosophy is based on buying the whole market, with a diversified global portfolio.

Whilst you would have still seen the losses in your Austria assets in 2018, you would also have had the positive returns from the Finnish market (the top performers in that year). Holding all (or almost all) of the market can help to provide more reliable outcomes over time.

Dimensional’s research shows that ‘buying the market’ and holding over the longer-term has provided better outcomes for investors, than trying to pick the winners and losers individually.

Our message to our clients is clear – “don’t try to time the market, and don’t try to pick the winners and losers”. A solid, long-term financial plan, taking no more risk than you are comfortable with, will stand you in very good stead, allowing you to concentrate on the people and goals that really matter to you.

Dimensional say that “the market is a great information processing machine. It runs on human ingenuity, which is why returns tend to grow over time as people work to innovate and improve the value of the companies they work for. So start the new year off with a clean slate—just like markets do every day.”

Invitation

Interested in discussing the chart in more context to your own financial planning? Get in touch today to arrange a free, no-commitment consultation with our team here at WMM.

You can call us on 01869 331469.

Jan 18
0

HMRC: You don’t need to use claims firms to claim tax relief

By | Tax Planning

Some employees are able to claim tax relief on work-related expenses if their employers have not already reimbursed these.

This can include items such as:

  • work clothing and uniforms, including a laundry allowance
  • any equipment required for their work
  • professional fees and subscriptions (such as membership to professional bodies)
  • using their own vehicles for work travel (not including the usual home to work commute)
  • costs of working from home, if there is no other option

The gov.uk site has guidance on who can claim and what for. You’ll first need to set up a Government Gateway login, if you don’t already have one, and from there the process is relatively simple.

However, if you were to use a search engine, the Government’s own site might not be the top result. There are many claims companies, offering to help you claim the tax relief. These companies also advertise widely on social media, with a simple ‘click here’ to begin the process.

The claims companies will liaise with HMRC on your behalf, as your ‘agent’ and arrange any reliefs you might be eligible for. As you might expect, the claims companies charge, for their ‘help’, often taking a percentage of the tax reclaim before passing it on to you.

HMRC are urging individuals to apply directly themselves, online or, if by post, by form P87 only, as the information required is exactly the same as they would need to provide to the claims company in any case.

Invitation

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

You can call us on 01869 331469.

Dec 12
1

How do you feel about money?

By | Money Tips

Unless you already have a relationship with a financial planner, you might never have been asked this question. You might never have considered how it is you actually feel.

Money is emotional

Although money is often seen as a number crunching, rational, exercise, (we all know what we should be doing, on a basic level at least) our relationship with money is an emotional one, full of highs and lows. Have you ever felt down and used a quick spending spree as a ‘pick-you-up’, only to feel guilty for spending the money later?

How we feel about money can also be connected to our upbringing or our own environment, not to mention the wider world and the ‘financial crisis’, the ‘cost of living crisis’, the ‘energy crisis’. It might feel like we’re being fed more negative financial messages than positive ones at the moment.

Depending on how you were brought up, talking about money might feel like a taboo; talking about how much you have is rude and boastful, or maybe you have a sense of abundance but would like to see some evidence. Your money story may be that you should feel guilty for spending a lot of money on something, talking about how much you haven’t got, or asking for financial help, when perhaps your belief is that you should fix it yourself. Even if your own story isn’t negative, it can still be complicated.

Perhaps this generation-old difficult conditioning is why people often find it so hard to talk about money now, even from haggling for a better price, to discussing long-term money plans and wishes with family, both of which can lead to challenging your feelings or your understanding of your finances, for you or your immediate company.

How to talk about money

Just because the discussion might be hard or uncomfortable, it doesn’t pay to ignore the issues at hand. The key is to recognise and use those emotions to face the issue, and take action.

This could mean focusing on your goals and what you need to do to achieve them.

It may simply mean you have little idea what you are spending, even if you feel it’s affordable, and you want a better handle on things. The answer here might be setting out a budgeting and saving plan for your household. There are many budgeting apps and guides available, such as this one from StepChange.

Perhaps you want to put long term savings plans in place for specific goals, such as your children or grandchildren’s University fees or house deposits. You may have already saved efficiently over the years, but you’ve ended up with multiple accounts and you want to feel more in control overall. Do you have questions around arranging your estate more efficiently for the benefit of your heirs? These are all things a financial planner can help you with.

We ask our clients initially, and regularly, “in an ideal world, what would money mean to you?”. The answer usually includes “to not have to worry about it”. The answer isn’t ever in pounds and pence. It’s an emotional outcome.

Invitation

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).

Dec 06
0

What does my tax code mean?

By | Money Tips

HMRC issue tax codes automatically to your taxable income providers, whether this be an employer or a pension provider. Your code instructs your income provider how much tax to deduct from your pay.

The codes are reviewed each time tax legislation changes, you receive a ‘benefit in kind’ or your entitlement to tax allowances changes.

You’ll be used to seeing them on your payslips, and receiving notifications from HMRC that they have changed your code.

But what do the different codes actually mean?

We’ll summarise the mostly commonly seen tax codes here, however a full list can be found on the HMRC website.

The most common code is 1257L, and applies where the standard Personal Allowance of £12,570 (in 2022/23) is available. It’s used for most people who have only one job.

The letter relates to your situation. For example, L means you have the standard Personal Allowance and M means you’ve received a transfer of 10% of your partner’s Personal Allowance, N showing that you have transferred 10% of your Allowance to your partner.

BR shows that all the income from that source is taxed to Basic Rate, and NT means not taxed. WI, M1 or X shows that you are on emergency tax.

One that we often come across is K. This is referred to as a negative tax code. This shows that you have another source of income that isn’t taxed, and so that tax must be collected from other income through your K code. The number shows the amount of additional income that needs to be taxed, such as the State Pension, this is always paid gross, but is taxable.

For example, let’s say Mrs Smith receives State Pension of £15,570 each year. This is paid without deduction of tax.

Mrs Smith also has a work pension which pays her £4,000 a year. Her tax code here would be K300. This lets her pension provider know that they need to calculate the tax deduction for her work pension, on that pension (£4,000) plus an additional £3,000, so £7,000 in total. This would lead to an effective tax rate of 35% on this pension.

Mrs Smith also has a small annuity from her personal pension, and this has a BR tax code. Her pension provider will deduct Basic Rate tax from the full pension – her Personal Allowance and any adjustments have been taken care of on her State Pension and work pension.

How do I know my tax code is correct?

You can use the HMRC tax code page using your Government Gateway login. You can check the income that HMRC assume you will receive for the current tax year (you can also check the previous year). If you think the information isn’t correct, you can contact HMRC to ask them to update it.

Invitation

If you’d like to discuss taxation in context to your wider financial planning, 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).

Oct 19
0

Tuning out the noise

By | Financial Planning

You may have noticed that in our monthly newsletter a regular slot is given to a short video about ‘tuning out the noise’.

We usually reference this with “Watch this video and discover how partnering with the right financial planner plays a vital role in keeping investors on their financial plan and what really matters.”

 
The video is just under 4 minutes long. Even if you’ve seen this before, it’s worth re-watching as a timely reminder.

The message to ‘tune out the noise’ is particularly important at the moment, with all that is going on in the World, not least within our Government, the rising cost of living, and how interest rates are affecting bond markets.

At times like these there are a number of things that you can do to feel calmer and more in control:

  1. Read, watch or listen to less financial press and commentary.
  2. Accept that investing is always a two steps forwards, one step back journey.
  3. Try not to dissect your portfolio statement line by line – look at the big picture.
  4. Look at portfolio outcomes over the longest time frame you have available.
  5. Remember that a fall in value is not a loss unless you sell.
  6. Higher bond yields and lower equity prices point towards higher expected returns.
  7. Attempting to jump in and out of markets is simply guesswork, and likely to be costly.
  8. Place 2022 in the context of your multi-year, or even multi-decade, investment horizon.
  9. Keep your eyes on the prize of building future purchasing power over the longer term.
  10. Keep the faith – stay invested.

Invitation

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).

Oct 10
1

April 2023 deadline: Can I, and should I, boost my State Pension?

By | Pensions

When the new State Pension was introduced from 6 April 2016, the Government also temporarily extended the normal six-year window which allows you to pay Voluntary (Class 2 or 3) National Insurance Contributions (NICs) to fill in gaps as far back as 6 April 2006.

This extension ends on 5 April 2023, meaning that you now have less than 6 months to take advantage.

After the deadline passes, the standard last 6 years restriction will apply.

You may already have seen mention of this in the media, with some articles claiming you can boost your pension by up to £55,000. This is, of course, the best case scenario, for someone topping-up ten years of NICs.

How do I know if this applies to me?
The first step is to request a State Pension forecast and your National Insurance payment history. Both of which are available to download online, via your Government Gateway login.

If your State Pension forecast shows that you are already on track to claim £185.15 per week, this is the maximum or ‘full’ pension for 2022/23. You cannot increase your State Pension above the current ‘full’ pension of £185.15 per week.

The HMRC helpline (0800 731 0175 if you are not yet State Pension age, and 0800 731 0469 if you are already at State Pension age) has also proven to be very useful for several of our clients already, but do be prepared for a wait to get through!

How much will I get?
This depends on your personal situation. However, in our experience the State Pension top-ups offer a very good, secure return. It’s always worth checking to see if you can increase your pension, and by how much, so that you can make an informed decision.

Things to consider before proceeding:

  • You may be able to claim NIC credits
    Some people may be able to claim credits, rather than buy them. For example, time spent as a carer, or if you’re on certain benefits.
     
  • Not all NIC years need the same amount of money to complete them, some will be cheaper
    For example, where you have worked a part year, and paid some NI in that year, the top-up required to complete that year will likely be lower than for a year where you didn’t pay any NIC at all.
     
    This is where the HMRC helpline can come in handy, advising you of how much a top up of a particular year will affect your pension.
     
  • Some years won’t count
    This is particularly relevant for years prior to 2016 and if you were a member of a ‘Contracted Out’ pension scheme, and already gained 30 years by April 2016. Again, the helpline will be able to tell you if this is the case.
     
  • If you’re self-employed, you could pay less to top-up
    The current self-employed rate of Voluntary contributions is £163.80 per year, where Class 3 is £824.20 per year.
     
  • Not everyone will be better off by topping up
    If the additional State Pension from topping-up pushes you into higher rate tax, the benefit from the top-up will be reduced. You’ll still be better off, but it will take you longer to break even.

    •  
    If you are expecting to receive certain benefits in retirement, this may be reduced by increasing your State Pension, so you may not end up better off.
     

Invitation

The best place to start with this particular decision is with the Future Pensions helpline as mentioned above.

If you’d like to discuss this in context to your wider financial planning, 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).

Jul 15
0

A guide to portfolio rebalancing

By | Investment Planning

When you start investing it can feel very satisfying to see your investments arranged as you like. You have your goals established (e.g. retire aged 68 with a £300,000 pot), a horizon in view – say, 20 years – and a clear, long-term strategy about your attitude to risk and your mix of assets (e.g. stocks-to-bonds ratio).

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Jun 18
0

Ways to generate a retirement income

By | Retirement Planning

How do you generate a sustainable, comfortable income in retirement? For most of our working lives, our lifestyles are supported by a salary. As such, the thought of living off your savings and investments for 30+ years can sound strange. Given the complexities and timescales involved, careful planning is needed. This helps you mitigate taxes and costs which could eat into your retirement income, avoid dangerous withdrawal rates and manage risk so that your lifestyle is not jeapordised should the markets or UK economy experience turbulence.

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Jun 11
0

How a financial planner helps business owners

By | Financial Planning

Most business owners are aware of their need for an accountant. After all, taxes need to be filed each year and most limited companies recognise that it mitigates risk by getting a professional to look over everything. Yet why use a financial planner? To use an analogy, an accountant is like a mechanic for your car. They check that everything passes the legally required tests. Your financial planner, however, is like an experienced guide for a long, cross-continent road trip where you will encounter many challenges and opportunities that need navigating effectively.

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