Whilst the current UK lockdown measures are still in place, you may find yourself with some available downtime and so it may be a worthwhile exercise to put your basic wealth planning in order with the help of the simple checklist below.

1. Write a will

Recent research by The Royal London Mutual Insurance Society indicates 54% of adults in the UK do not have a will and six out of ten parents do not have one, nor do they have guardians in place who would look after their children.

For those who already have a will, this might also be a good time to review and determine if it needs to be updated in the form of a new will to reflect changes in circumstances or via a codicil.

It is also worth noting that marriage revokes an existing will unless the will was written in full anticipation of the marriage, whereas a divorce doesn’t revoke an existing will. As a result, life events can often necessitate the need to review an existing will to ensure it continues to remain up to date and reflect your wishes.

2. Establish a Power of Attorney

A Power of Attorney is a legal document that allows someone to make decisions for you, or act on your behalf should you no longer be able to, or if you no longer want to. This could be in the short term, for example as a result of spending a period of time in hospital, or long term due to mental incapacity.

These decisions can relate to your general welfare, including decisions made on your daily routine, any medical care, or in choosing a care home – this is known as a Health & Welfare Lasting Power of Attorney.

Alternatively, you may require assistance in making decisions regarding your finances should you be physically or mentally incapacitated. This includes managing your savings and investments, structuring your income requirements, paying your bills or selling your property(s) – this is known as a Property & Financial Affairs Lasting Power of Attorney (LPA).

You are able to appoint one or more attorneys to help you make decisions on the above. An attorney must be over 18 and have the mental capacity to make their own decisions. Where the expectation is that the attorney could only be required for a short period of time then a simpler ordinary power of attorney could be considered rather than an LPA.

3. Collate lost pensions arrangements

Are you aware of all of your existing pension arrangements? Even from that short-term employment you took up 10 years ago? Any pension funds which you have accumulated in your working life could make a real difference to your overall pension savings when you reach retirement.

Research carried out by The Association of British Insurers in October 2018 estimates that there is nearly £20 billion held within 1.6 million pension pots with an average size of £13,000 which have been forgotten.

If you suspect that you have an old pension pot from a previous job, you are now able to track down the pension scheme’s contact details by using the Pension Tracing Service which is a free government service: https://www.gov.uk/find-pension-contact-details

4. Update pension beneficiary form (expression of wishes)

You have reviewed your will; now do you know who will inherit your pension benefits? Pensions normally do not form part of your estate for inheritance tax purposes and are therefore not covered by your will. In order to specify who you want to inherit your pension after your death, you need to have an Expression of Wish in place and if any of your pensions pre-date your current relationship then you may want to review this to ensure they are up to date.

The best chance of ensuring your beneficiaries are able to retain the tax-advantageous pension wrapper in the form of a beneficiaries’ pension is to list them specifically on your Expression of Wish form and check the death benefit options of your existing arrangement.

You should contact your pension providers to find out your current nomination and to obtain the relevant forms as soon as possible.

5. State Pension

In 2016 the UK Government introduced the new single-tier State Pension. Under the previous system, it was difficult to understand exactly what you may have been entitled to until you reached your state retirement age, however the new system is designed to make this far simpler.

The new State Pension is based on your National Insurance record, requiring an individual to have 35 qualifying years to be eligible to receive the full amount. A qualifying year can include years where you have been in full-time employment, or where an individual has received National Insurance credits given to those who have caring responsibilities (i.e. those receiving Child Benefit).

The majority of individuals are unaware of how much they may be eligible to receive as their State Pension, or at what age they will qualify for it. The link below provides further information on how much you could stand to receive and at what date it could become payable. The State Pension could form a valuable part of your retirement income, so understanding your entitlement is essential: https://www.gov.uk/check-state-pension

6. Review old insurance policies

Every month, do you see that direct debit leave your bank account and go off to an insurance provider for that protection policy you took out many years ago? Or do you have that prehistoric mortgage endowment policy which you keep receiving annual statements for? Do you know what you are actually covered for and whether this is sufficient for your needs?

Insurance may also need updating following changes in your personal and financial situation and/or following certain life events, including:

– A new job or changing to self-employment – You may have sold your business and be considering retirement – Marriage or divorce – Children or grandchildren – A change in either yours or your partner’s health – Paying off a debt or other liability – Moving house or buying/selling property – Making financial gifts from your estate.

Right now might be the time to review your protection policies to ensure you are adequately covered in the event that you may have a need to make a claim on your insurance policies. If you cannot locate your original policy documents, you should contact your insurance provider to find out what exactly you are covered for. As you review these policies, you should also check if your life assurance policies are held in trust. Ensuring these policies are written under trust will mean that when the funds are paid out they do not automatically form part of your estate or your beneficiary’s estate on your death.

7. Consider new insurance policies

If you do not have any insurance currently in place then this is something that you may wish to consider. Putting in place a basic level of protection is probably more affordable than you think and you could buy certain life insurance for just a few pounds a month.

There is currently what is referred to in the industry as a ‘protection gap’ in the UK. This means that a large proportion of the UK would be left financially vulnerable should they, or their spouse, pass away prematurely or suffer an illness or injury that would affect their ability to earn. Despite this apparent financial vulnerability and need for a safety net, a research study by the Financial Conduct Authority (FCA) highlighted that 65% of the UK adult population has no form of insurance. Among the 35% who do have some form of insurance more of them have critical illness insurance (10%) than income protection (4%) and it is estimated that from c.26.7 million households in the UK, just 300,000 have an income protection policy in place.

Given the recent COVID-19 pandemic and the increasing levels of staff being furloughed or made redundant, now could be the time to consider your ongoing protection needs for you and your family.

8. Consider making gifts

Right now might be a time that someone close to you needs some financial support and you may want to help. Making an outright gift from capital is usually classed as a Potentially Exempt Transfer for Inheritance Tax (IHT) purposes. This means that if you were to pass away within seven years of making the gift, it would form part of your estate for IHT purposes unless the gift qualifies for an exemption.

One such exemption is the IHT exempt annual allowance of £3,000 per tax year. Each individual is able to make an outright gift of £3,000 per annum which is immediately exempt from their estate for IHT purposes. In addition, once the current year’s allowance has been maximised, you are able to utilise the previous year’s unused allowance meaning the first gift could amount to £6,000, which is immediately exempt from IHT.

Each tax year you can also give away up to £1,000 per person in consideration of marriage or civil partnership (or up to £2,500 for a grandchild and up to £5,000 for your son or daughter).

Finally, where you have the disposable income to do so, gifts out of income could also be immediately exempt from IHT provided the gifts are from disposable income, the intention is to establish a regular pattern of gifting and they do not adversely impact your standard of living.

Concerns have been raised about the potential longevity of these valuable reliefs with several influential reviews calling for wholesale change to the IHT regime. With asset valuations potentially lower, if you feel that you are in a position to do so, now may be an opportune time to make those gifts.

9. Charitable donations

You only have to hear the story of Captain Tom Moore, a 99-year-old war veteran who raised an enormous amount for NHS Charities Together by setting out to walk 100 lengths of his garden before he reached 100, to realise how many people are making charitable donations during the lockdown. You may be making donations to a charity close to your heart at this time too.

If you are a UK taxpayer when you make these donations you are usually able to elect to apply Gift Aid to these contributions meaning the charity you are donating to receives an extra 25% at no cost to you.

In addition, if you pay tax above the basic rate, you can claim the difference between the rate you pay and the basic rate on your gross donation (i.e. the donation amount after gift aid is applied). You should therefore remember to make a note of the donations you make so that you can apply for the additional relief on completion of your self-assessment tax return.

10. Budgeting

With all this extra time on our hands, now could be a good time to go through the rather boring (and sometimes frightening) exercise of seeing what you normally spend. This may be especially important if you are currently facing a cut in pay or income as a result of the pandemic. While in lockdown you are likely to save costs on some expenses, such as parking, petrol, train fare, coffees, eating out and entertainment.

You may also have been able to put certain monthly subscriptions on hold such as gym memberships. As such, a good starting point would be to review your expenditure prior to lockdown to determine how much is available in disposable income to start a new savings arrangement, make gifts out of income to a loved one or to your chosen charity.

11. In Case of Emergency (ICE) document

Do your family members know where all your important documents are held, who your financial adviser, investment manager, accountant or solicitor is and do they have their contact details? Has one member of the family historically controlled all the family finances? Now would be a good time to put all the important information into one document, including the location of your will, and anything else you think would be relevant if something were to happen to you.

12. And finally, consider the Budget 2021

It is worth remembering that the Spring budget is planned for March 3rd this year. Chancellor Rishi Sunak cancelled the Autumn Statement so we may see some changes announced in this year’s budget that may well impact your future financial planning. Below is a brief checklist of just some of the things you could consider before the end of the tax year.

Pensions – Pay the maximum you can afford into your pension – Carry forward unused pension contributions – Pay into your spouse’s pension – Boost your state pension

Investments – Use your annual ISA allowance – Use your Capital Gains Tax Annual Exempt Amount – Pay into your child or grandchild’s JISA or pension plan – Consider tax incentivised schemes such as VCTs or EIS

Tax planning – Consider bringing forward any capital losses to offset gains – Don’t forget the marriage allowance – Gifting to reduce your estate for inheritance tax purposes.

Remember to always take professional financial advice. If you would like one of our Advisors to review your finances, are unsure of how your portfolio is performing, or want to look at alternate ways to get a good return on your savings and pensions, please call us on 0114 235 3500 for a free initial meeting.

Our office is operating as normal but we can also offer appointments by telephone or Facetime, Microsoft teams & Zoom.

Summary

2021 kicked-off with yet another historic moment. Mobs of Trump supporters stormed the US Capitol after the then president demanded support for the claim that he, not Biden, was the real election victor. Despite this attempt to overthrow democracy, the US congress confirmed Biden as president of America. Putting Trump in the rear view mirror might now be made even easier since, following the Capitol Riots, Twitter has permanently suspended his account.

Headlines in the UK painted a largely negative picture as COVID cases escalated. Over 68,000 confirmed cases were recorded on the worst single day, and the UK death toll has now surpassed 100,000. These losses are tragic, but we think it’s important to keep in mind that the outlook is much brighter than the current picture. The approval of the Oxford AstraZeneca is a big step forward. It is cheaper and easier to store than the Pfizer vaccine. The UK vaccine rollout is racing ahead of the rest of Europe, and the ability of COVID to cause further recessions around the world is small and shrinking.

The ongoing vaccine programmes worldwide are an overwhelming reason to be positive. It is increasingly clear that COVID is no longer an unknown problem. The challenges are much clearer. They involve vaccine production, distribution and rollout, all of which are difficult, but solvable. To put the availability of the vaccine into perspective: the estimated supply of the Oxford vaccine in 2021 will be enough alone to vaccinate the entire World’s most vulnerable people.

Markets may already have put COVID-19 behind them. Financial headlines have been dominated by the David-and-Goliath battle between small investors and Wall Street, with GameStop somewhere in the middle. After being hit hard by the pandemic, many institutional investors started shorting the stock. In a bid to get back at the short sellers, small investors came together on Reddit and have inflated it’s price dramatically, costing hedge funds many billions. GameStop, Tesla and Bitcoin are reminders of the froth investors are currently navigating. We’ll continue to look at the long term, rather than becoming distracted by violent movements in localised areas.

Because under the froth, markets have been largely positive through January. Biden wasted no time in unveiling a $1.9 trillion stimulus package and the UK have announced yet more measures to protect badly affected businesses. Companies know that the end is in sight, and they also know that consumers are itching to spend as soon as they can. Despite the inevitable bumps, the world is poised for a year of strong growth.

As things begin to return to normal, the conditions for a strong period of global growth are firmly in place – so our portfolios have decent allocations to equities in order to benefit.  Once growth becomes really embedded, attention will turn to the low level of interest rates, and at some point, central banks will have to begin a hiking cycle. That day is a long way off, but we still think that government bonds are unattractive, and prefer to invest in alternative assets that can still offer defensive qualities.

We have a number of long-term core views that help to guide our investment decisions and allocations within portfolios:

The recovery is almost over – growth comes next… The world has never seen as much coordinated stimulus as in the past nine months. We believe this sets the stage for a strong economic recovery across the world in 2021. The return to growth will occur at slightly different paces in different places – much of Asia is already back on track, the US should have a vibrant start to the year, with Europe finishing strongly. As the recovery continues and turns into an expansion, we want to be exposed to it. Positive for credit and equity.

Our portfolios are positioned for the new economic cycle… We think that the new cycle will require new leaders. Large US and Chinese technology companies will still be crucial as part of the growth cycle, but other industries are now better positioned to benefit, with low cost of debt and a cash-rich consumer desperate for products and services. We think that smaller, more nimble businesses can ride the wave best. Positive for lagging equity.

The virus hasn’t derailed growth… Lockdowns are unlikely to be as severe and as widespread as previously. At the same time offers a concrete way to end this crisis. Looking at the long-term and looking globally, there is more economic good news than bad news – despite how it can feel in the UK at the moment. Positive for credit and equity.

Equities

Equity markets in January were mixed. Emerging markets continued to do fairly well, returning around 3% over the month. Developed market equities had more of a shaky start shrinking by almost 1% over the month. Astonishingly, the GameStop saga had a part to play in this as hedge funds were forced to sell long positions to cover their shorts. In the last working week of January, all of the Nasdaq, Dow Jones and S&P 500 fell by over 3%.

Luckily, this pain is likely to be short-lived. The other main cause of bad developing market performance was likely to have been the Johnson & Johnson vaccine data, which fell short of what markets were expecting. It is reasonable to expect February to be better.

The UK started the month positively but eventually felt the shockwaves from the US. The FTSE initially surged but came back down to just below where it started the year. Despite this, a bad week for the UK’s blue-chip stocks will not drastically change the behaviour of long-term investors.

European stocks fell sharply towards the end of the month. This was largely due to the GameStop battle and worries around the availability of COVID vaccines to Europe. Germany has warned of 10 weeks of vaccine shortages. With the UK vaccine rollout steaming ahead, the EU has demanded that AstraZeneca diverts some of its supplies from the UK to Europe.

Despite how it may feel, the global economy is recovering from COVID, and in the UK we have every reason to be positive. On Saturday, more than half a million UK citizens received a dose of the Vaccine. Outside of the UK, the world is getting better at distributing the vaccine.

Client portfolios are globally diversified and have been positioned to benefit from the economic recovery and stimulus injected into the economy since the middle of summer.

Fixed Interest

Bond yields spiked in January, but this doesn’t necessarily change our view towards them in the short term. Even following the spike, yields remain historically low. We instead focus on alternative investments to provide protection to client portfolios. We continue to hold a low allocation to government bonds in more cautious portfolios with zero exposure in medium to high-risk portfolios.

Corporate bonds continued to provide positive returns to portfolios over the month. We have a preference for bank bonds (AT1 Bonds), which outperformed the corporate bond market over the month. Bank bonds have a similar level of risk to the wider corporate bond market, however, they offer higher returns as many investors remain scarred from the financial crisis. 

We continue to have a preference for Asian High Yield bonds, as returns are higher and default rates have historically been lower than in the US. Additionally, many Asian countries are successfully re-opening their economies without large outbreaks of the virus.

Alternatives

Our allocation to alternatives remains in place to predominately diversify fixed interest exposure given the record-low yields currently available in the market. We tend to avoid traditional alternatives (gold, infrastructure and commodities) and instead opt for strategies that are independent of the global economy.

Looking to the start of 2020, government bonds with the highest yields fell the most throughout the year. This means they provided a greater level of protection to client portfolio when equity markets fell. However, now the majority of government bond yields are close to zero if not below zero. We therefore have a meaningful allocation to alternatives as a source of diversification and protection.

Our alternatives allocation generated returns of c.15% last year and remains well placed to provide protection, whatever the weather – which we’ve seen in January too.

If you would like one of our Advisors to review your finances, are unsure of how your portfolio is performing, or want to look at alternate ways to get a good return on your savings and pensions, please call us on 0114 235 3500 for a free initial meeting.

Our office is operating as normal but we can also offer appointments by telephone or Facetime, Microsoft teams & Zoom.

Despite the challenges of Covid-19, Sheffield Cathedral are hosting a Christmas Tree Festival to bring some Christmas cheer and joy to the city. 

Hamnett Wealth Management are very pleased to be able to sponsor a tree which the team have decorated and is now on display at the Cathedral. 

The Christmas tree festival is now live and online for you to view the decorated trees and vote for your favourite. There are two categories: favourite charity tree and favourite business tree, and local good causes will benefit from cash prizes.  

You can also see the trees when visiting the Cathedral for prayer, reflection and worship.

At the end of the festival, all the trees will be disposed of environmentally. The firm doing this will make a donation to The Sheffield Children’s Hospital Charity.

To view the trees, please visit: Christmas Tree Festival

For more information on The Sheffield Children’s Hospital Charity, please visit: The Children’s Hospital Charity

Next week (9^th -13^th November) is Talk Money Week.  People in the UK don’t talk about their money enough.  Despite the COVID-19 crisis affecting our finances, 9 in 10 UK adults – that’s 47 million of us – don’t find it any easier to talk about money, or don’t even discuss it at all.

Talk Money Week is designed to increase people’s sense of financial wellbeing by encouraging them to open up about personal finance – from pocket money to pensions. Held each November, it’s an opportunity for everyone with an interest in financial wellbeing to get involved with events and activities across the UK, designed to help people have more open conversations about money.

Everyone has money worries – and for many, current affairs in 2020 have made these worse – but just as you can take actions to improve your physical health, you can take some simple steps to feel more in control of your financial wellbeing too. Research shows that people who talk about money:

• make better and less risky financial decisions

• have stronger personal relationships

• help their children form good money habits for life

• feel less stressed or anxious and more in control

Building money conversations into our everyday lives also helps us build financial confidence and resilience to face income shocks, life events and whatever the future throws at us.

For more information about Talk Money Week, please visit https://maps.org.uk/talk-money-week where you’ll find a range of guides to help you start the conversation. Join in the conversation online using #TalkMoneyWeek

If you’d like to have a conversation with us about your financial future, please call us on 0114 235 3500.  We’re operating as normal but can also offer appointments by telephone or Facetime, Microsoft Teams and Zoom.