Prices, alongside temperatures, are rising

While summer is traditionally a time when everyone hopes to relax a little, developments this year are making that harder than usual. From the government dealing with difficult by-election results, soaring inflation and the fall-out from the war in Ukraine to businesses and individuals having to focus on new strategies to get through these challenging times.

The Chancellor’s strategy of freezing tax thresholds for three years was always going to create wealth erosion, but now, coinciding with accelerating inflation, it is set to create a record number of higher rate taxpayers by 2025/26. Those who are pushed over the threshold may find there are ways to reduce the impact, starting with making sure they take full advantage of their tax allowances.

Rising inflation of course is affecting all of us, but those nearing retirement may have particular cause for concern. At a point where you may be considering buying an annuity, ensuring it is index-linked is essential, although the monthly payment may fall short of being able to fully fund your lifestyle. Those planning to retire in the next couple of years may need to rethink their plans to get through this period of high inflation. In the Summer edition of our newsletter sent to our clients we highlight this and other issues around which we can offer tailored advice.

And there is another source of advice. While many are loathe to listen to their parents, there is evidence that it may be wise to hear them out about retirement planning. To try and avoid your own ‘if only I’d saved more, earlier’ moment, we report on the results of a study of over 50s approaching retirement who wish they had made different choices when they were younger. If you can save more into your pension fund to build up a larger pot, earlier, it will of course reap rewards when the time comes to access the fund.

For investors, inflation emphasises the need to look beyond headline numbers on returns and calculate the real return on your money. While a 7% projected yield looks tempting, when inflation of over 9% is factored in, that turns into a negative figure. We explore getting real about real returns.

It is summer, however, so we have a holiday financial checklist. Despite airports struggling with low staffing and possible strikes, if you are planning to take a trip to Europe this summer there is some good news. Until the end of this year you don’t need a visa and most countries no longer require tourists to take a Covid-19 test. Check the deal with your mobile phone provider, however, as some companies have introduced roaming charges for European destinations.

Our next update will come in autumn when we will be anticipating the Chancellor’s autumn statement.