Friendly Money Newsletter
Personal finance just got complicated!
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It’s been a year of mixed emotions for many of us. Joy has very often combined with sadness and stress. The highs and lows have been amplified and it can sometimes be difficult to comprehend these mixed emotions.
I’m similarly ambivalent about wealth and personal finance. With my professional and coaching hat on, recent developments have been a gift: a delight of incompetence and unintended consequences to unwrap that have materially changed financial planning. What’s not to like for someone who enjoys nothing better than digging around in the detail and helping people understand what it all means for them?
Yet, this chaos has not only damaged the economy, it is having a catastrophic impact on the finances of rich and poor alike. Estimating the fiscal cost of the pension measures alone on my own savings literally made me shudder. And I’ve had countless conversations with small businesses, grappling with the assault on commerce in the shape of slashed reliefs and hiked NI rates.?
It seems likely that 2025 will be defined by the consequences of these ill-judged measures. I sleep better though knowing that the train drivers will be able to afford a nice present for Tiny Tim!
Speaking of Christmas, I don’t imagine anyone’s going to be in the mood for much financial navel-gazing, but permit me to plant a couple of seeds to ruminate upon over the festive season. I’ll pick up these threads in the New Year when everyone has made resolutions to be kinder, better and richer!
The first is that personal finance has very materially changed. Saving into a pension is no longer a viable means of estate planning (and nor should it ever have been). However, the manner of making pensions subject to inheritance tax materially changes the economics of saving for retirement and adds significantly to the administrative burden of those coping with the death of a loved one.
I appreciate that the linked article below is behind a firewall (apologies for that). The gist though is that multiple levels of tax will soon apply to pension benefits (IHT, income tax and the potential loss of the residential nil rate band). This will not only encourage the wealthy to become economically inactive by retiring early, but will also promote investment in areas all recent governments have sought to discourage, such as property and second homes. This will inevitably make pensions less attractive for some people and undermine confidence in pensions for all.
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You should be able to access this podcast?however, in which I’m a guest of Merryn Somerset Webb discussing the scintillating topic of pension drawdown. Being the nerd I am, it raises numerous challenges, and potential solutions to what is a very real problem for almost all retirees.? ?
Take care out there,
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Stuart & Vicky
Disclaimer: Stuart Trow is a financial educator, not a regulated financial adviser, so cannot provide specific financial or investment advice.? The opinions expressed do not constitute investment advice and regulated independent advice should be sought where appropriate. https://www.pensionman.co.uk/about-pensionman-actual/
Lead Capital Markets Document Negotiator at Wells Fargo
2 个月Dear Stuart, very best wishes to you and Vicky for 2025!!