Nick Hodgetts Financial Review of 2017
Nick Hodgetts, Owner of Lighthouse Platinum Wealth Management Ltd an independent financial adviser near Ipswich, takes a look at the market development from 2017 and the opportunities for 2018.
Investment markets in 2017 have seen the usual ups and downs but, as of mid-December, the FTSE100 is showing a gain for the year of around 3.7% (though it’s certainly been higher during the year). Perhaps of more relevance to most people’s investments and pension funds is the FTSE250 that is currently showing a gain of 9%.
Interest rates were finally increased for the first time since 2007 – but only by 0.25%. That actually doubled the Bank of England Base Rate but can you spot the difference? If you are a saver, probably not yet! If you have a mortgage perhaps now is the moment to talk to Michael, our Mortgage Advisor, about a review? One thing that is increasing, however, is inflation so if you aim to grow your savings to show a real gain you’re probably now aiming for at least 5% pa. That target will currently have to involve some investment risk and there is a wide choice of low risk investments aiming at modest but consistent returns around this target.
I believe we are unlikely to see interest rates rise quickly in the UK because the Bank of England has suggested that any further rate rises are likely to be “gradual” and “limited”. Key concerns would be that sharply increased interest rates may lead to difficulties making mortgage payments and lead to losses for those investing in bond markets.
As the average age of a first-time-buyer soars into the late 30’s this year has seen the rise of the Bank of Mum & Dad. Some recent research carried out for Prudential showed that 68% of parents have or expect to lend money to their children (on average around £12,700) but nearly half don’t expect to see it repaid. The most common reason is to help with house purchase but 1 in 5 is for general living expenses with cars, credit cards and student loans also popular reasons.
These loans (gifts?) from parents and grandparents risk making long-term dents in their own financial planning.
Those who are now younger than 47 have to wait until age 68 to receive the State Pension which is now based on a flat rate, currently around £159 per week. Those wanting to retire younger who have personal pension savings can make use of Flexible Access Drawdown to “fill the gap”. In the past, up to 90% of those with pension funds used them to purchase an annuity at retirement but that trend is reversing now with more pension savers wanting access to capital and income flexibly while still providing financial protection for loved-ones at retirement. Sadly, there are scammers out there so care is needed – only take advice from advisors authorised by the Financial Conduct Authority.
MiFID II sounds like the latest expedition to Mars but it is in fact the ‘Markets in Financial Instruments Directive 2’ – the latest update to European legislation for financial services that becomes effective on the 3rd January 2018. By the way, we were apparently going to adopt it in the UK irrespective of Brexit. One of the changes investors will see is more frequent valuations sent to you for your investment and pension savings – in the past you will have seen annual reports, in future you will see half-yearly or even quarterly valuations so bear that in mind when looking at the returns quoted, they may only be reflective of the past three months.
Being someone who only dips into the soaps I noted the usual phenomenon of explosions, murders and love trysts all happening in the same street but also that the soaps now include some of the very serious and potentially upsetting issues we see in the news such as grooming. A case of art imitating life?
Despite the current confusion over the UK’s future position in the world, I’m looking forward to a repeat of this year’s positive investment returns. Let’s all hope I’m not disappointed!
Past performance is no guarantee of future returns.
For a review of your finances or support in planning for the future, contact Nick and his team on 01473 730999.