Updates, news and services from lakeside financial solutions

State Pension Age on the Rise

The government has recently made changes to the state pension age, which will affect the point at which you can retire and when you can access both your state and personal pension.

For a sustained period, the state pension age was 65 for men and 60 for women; however, it increased to 66 for both men and women. Moreover, it will continue to rise gradually over the coming years, reaching 67 by 2028 and 68 between 2037 and 2039.

Your state retirement age is now aligned with the date you can access your personal pension, so as the age for one increases, so too does the other.

You can currently access your personal pension ten years before your state retirement age. So, for example, if your state retirement age is now 68, you will not be able to access your personal pension until the age of 58.

You can check your state pension age on the government website: www.gov.uk/state-pension-age. There is no default retirement age, so once you reach state pension age, you don’t have to stop working, but you won’t need to pay National Insurance Contributions anymore should you continue to work.

Please feel free to contact us for more information - admin@lakesidefs.co.uk

What is inflation?

A: Inflation is the cost of goods and services increasing over time, which means a decline in purchasing power. In other words, inflation erodes the real value of money, and so a unit of currency effectively buys less than it did previously. For example, the average cost of a loaf of bread 20 years ago was 70p, whereas now it costs around £1.20. Likewise, in 2001 a pint of lager would set you back around £2.05 compared to the £3.92 it costs to purchase a pint today.

Why is inflation on the rise?

A: After a long period of low-interest rates to support everyone through the financial crisis and the Covid-19 pandemic, there has been a rise in inflation, and it’s continuing to rise. So, to try to control inflation, the Bank of England is expected to raise interest rates. Unfortunately, we don’t know how long it will take the Bank of England’s policy to start to work, nor how effective it will be in curbing inflation.

What will happen in the meantime?

A: The cost of goods and services will keep going up for the foreseeable future, and the rising inflation means that the buying value of money sitting in the banks will go down. It matters more over time. So, for example, if inflation was on target (2%), £100,000 in ten years’ time would only be worth £82,035 in today’s money. But on current expectations, it could be worth a lot less than that.

What does it mean for client investment portfolios?

A: As interest rates go up to try to stop inflation, the fixed interest elements of a portfolio are likely to suffer. So we’re trying to get ahead of the curve to address the issue by removing some of the fixed interest funds from client portfolios and replacing them with real assets. These are assets with intrinsic value like precious metals and commodities, as well as assets that have inflation-linked income, such as property and infrastructure like utilities. The aim is that as inflation continues to rise, so too will these tangible assets.

Will the changes increase the portfolio cost or risk?

A: The risk of the portfolio will remain at the same level. The changes might increase the overall cost of the portfolio marginally, but the potential impact on the portfolio’s performance would outweigh the slight cost increase. As we see the current situation being a medium to long-term problem, we feel it’s worth taking out fixed interest elements that would have an adverse effect on a portfolio and introducing something that has the potential to perform better, like real assets. The cost of living is going to go up considerably in the next three to five years, but by taking this approach, the value of clients' portfolios should increase too overall.

What next?

A: If you’re in a managed portfolio, we will be speaking to your managers regarding the actions they are taking.

Simple Wills

A simple will is better than no will at all. Lakeside practice principal Matthew Hibbert explains the need to have one in place and outlines the process of doing so.

What is a simple will, and at what point should one be made?

M: A basic will should be drawn up as soon as you have children or any kind of assets. The main aim of a simple will is to make the administrative process of who will care for your children and what happens to your assets after you die as straightforward as possible.

What does a simple will include?

M: You will need to appoint an executor who will be responsible for making sure the wishes/instructions expressed in your will are dealt with accordingly and who will manage any affairs related to your estate following your death. You would also need to name who would be the guardians of any children under 18 and decide who would get what out of your assets. These are known as beneficiaries.

How do you write a simple will, and what are the risks of not having a robust document in place?

M: If your assets don’t mount up to being hit with inheritance tax, a simple will can work just fine. However, if your circumstances aren’t straightforward or your primary concern is protecting your assets, it’s best to seek advice from a professional and have a more detailed will drawn up.

In theory, you could write a simple will on the back of an envelope as long as it’s signed and witnessed, giving a simple explanation of your wishes. The risk is that if it isn’t drafted correctly any ambiguity may need to be resolved through the courts which can cause upset and delays for the family.

How can Lakeside assist clients wanting to write a simple will?

M: We have free simple will templates available for those whose circumstances are straightforward and are just looking to appoint guardians and beneficiaries. The templates include legally tested clauses, and so if the will was contested in court, it would stand, and any ambiguity would be dealt with. However, knowing if these clauses are suitable for you is where the need for advice comes in.

"We have free simple will templates available for those whose circumstances are straightforward and are just looking to appoint guardians and beneficiaries."

For anyone whose circumstances are more complex, it is especially important to have an adviser talk through the needs and requirements of the will. We can provide individual will writing guidance and look at protecting assets through estate planning.

You can find out more about making a will here www.lakesidefs.co.uk/make-a-will-make-a-choice/

For further information on making a simple will please contact: admin@lakesidefs.co.uk