Running a business takes time and effort, from initial setup to scaling and growth. With so many responsibilities, financial planning and tax-saving strategies often take a backseat. However, smart tax planning can significantly reduce tax liability and free up capital for business growth.

At Ifamax Wealth Management, we have helped business owners across various industries for over 20 years. Below, we outline key tax-saving strategies to help you manage your tax burden effectively and improve your financial outlook.

Why Reducing Tax Liability is Crucial for Business Owners

Businesses are subject to multiple taxes, including corporation tax and National Insurance Contributions (NICs). Without proactive planning, tax liabilities can erode profits and restrict cash flow.

By implementing tax-efficient strategies, business owners can:

• Free up cash to reinvest in business expansion.

• Improve financial stability and long-term growth prospects.

• Ensure compliance with tax regulations while minimising liabilities.

• Create a more tax-efficient income strategy for personal wealth building.

Income Strategy: Salary or Dividends

As a business owner, you have the flexibility to structure your income tax efficiently. The most common approaches include salary payments and dividends. Understanding the tax implications of each is crucial for optimising your earnings.

Salary vs. Dividends

Salary

Taking a salary through your company means paying tax via HMRC’s PAYE system, similar to employees. This includes:

• Income Tax and National Insurance Contributions (NICs) are deducted at source.

• Tax-deductible expenses for the company, reducing taxable profits.

• Employer NIC obligations depend on salary levels.

While straightforward salaries can lead to higher tax liabilities than dividends.

Dividends

Dividends, paid from company profits, are a tax-efficient way to extract income. Key considerations include:

• No National Insurance Contributions (NICs) on dividend payments.

• A lower tax rate than salary (based on income tax bands).

• A dividend allowance of £500 for the 2024-25 tax year, meaning the first £500 of dividends is tax-free.

However, dividends are not tax-deductible for the company, meaning corporation tax still applies before distribution.

Pension Contributions: A Smart Tax-Saving Tool

Paying into a pension directly from your business is one of the most tax-efficient strategies. Pension contributions provide multiple benefits:

• Reduce Corporation Tax, as employer pension contributions are a tax-deductible expense.

• Avoid higher rates of Income Tax and National Insurance.

• Move business profits into personal wealth in a tax-efficient manner.

For example, if your company is subject to a 25% Corporation Tax rate, a £10,000 pension contribution would only cost the company £7,500 after-tax savings.

Pension Carry Forward

If you have unused pension allowance from the last three tax years, you can carry it forward to make larger contributions in the current year. This is especially beneficial for business owners with fluctuating incomes or those looking to make significant contributions before retirement. However, strict rules apply, particularly regarding earned income and the purpose of contributions.

Charitable Giving: A Tax-Efficient Strategy

Making charitable donations through your business can also help reduce tax liability. Charitable contributions can be deducted from profits before tax, reducing your overall Corporation Tax bill. Business owners can donate via:

• Direct financial contributions.

• Donating equipment or assets.

• Sponsorship of charitable events or initiatives.

Not only do charitable contributions offer tax benefits, but they also enhance corporate social responsibility and brand reputation.

Collaborating with Tax and Financial Professionals

Navigating tax planning strategies requires expertise and careful consideration. Working with professional tax advisors, accountants, and financial planners can help ensure you:

• Maximise tax-saving opportunities while staying compliant with regulations.

• Plan effectively for future financial goals, including business succession or sale.

• Implement tailored strategies based on your income structure and business needs.

At Ifamax Wealth Management, we collaborate with your existing professional network to create a holistic tax and financial plan that aligns with your long-term objectives.

Conclusion 

Reducing tax liability is an essential part of business owners' financial planning. By structuring income tax efficiently, leveraging pension contributions, making charitable donations, and working with experienced professionals, you can optimise tax savings and reinvest more into your business’s future.

At Ifamax, we understand that growing a business is a priority. We help business owners implement simple yet effective tax strategies. Contact us today if you’d like to explore tax-saving opportunities tailored to your situation.

Risk warning

This article is distributed for educational purposes only and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy, or investment product. Reference to specific products is made only to help make educational points and does not constitute any form or recommendation or advice. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.  

According to the National Statistics Office, self-employed individuals comprise around 13% of total employment. Prospect.org.uk reports they contribute over £300 billion to the UK economy, around 14% of GDP.

However, self-employed people, essentially business owners, face unique challenges. Without employer support, they lack the financial security of traditional employment. Despite these challenges, significant opportunities exist to effectively reduce tax bills and fund retirement.

In this blog, we’ll explore pension planning for the self-employed and touch on other financial planning relevant to self-employed individuals.

Why Self-Employed Professionals Need Pension Planning

Pension planning is an essential part of financial planning for self-employed professionals. Unlike employed individuals, they must secure their future income without workplace pensions or employer contributions.

The nature of self-employment often means there’s no tangible business to sell or a passive income stream once work stops. Early savings provide long-term security, tax advantages, and peace of mind when it’s time to slow down or retire.

Understanding Pension Options for Self-Employed Professional

Data from LV shows that the average person will hold nine jobs. While self-employed individuals may have participated in workplace pensions during past employment, they now require alternative solutions.

The most popular options include the following:

1. Self-Invested Personal Pensions (SIPPs): These provide flexibility and a wide range of investment choices, making them ideal for self-employed individuals.

2. Personal Pensions: A straightforward option offering a lower-cost route to retirement savings.

3. Stakeholder Pensions: These are regulated, low-cost schemes offering fixed charges and flexible contributions.

Each option has its benefits, but a financial advisor can help determine which suits your needs.

The Benefits of Starting Early

Starting your pension contributions early is crucial for long-term financial security. According to the Actuarial Post, a 22-year-old investing £162 monthly (with a 2.5% annual increase) until age 65 could amass a pension pot of over £604,166. In contrast, starting at 32 with the same contributions would yield only £286,799.

Delaying contributions reduces your retirement fund and requires significantly higher monthly payments later to catch up. Without employer contributions, self-employed individuals must prioritise early and consistent savings to maximise the benefits of compound interest.

Tax Relief and Benefits for Self-Employed Pension Contributions

One of the biggest advantages of pension contributions is tax relief. For self-employed individuals:

• Contributions reduce taxable income, lowering your tax bill.

• You can make contributions to cover unused allowances from previous years.

• Tax reliefs can significantly enhance your retirement savings, making pensions an efficient way to save.

Working with a financial advisor can help you optimise these tax advantages.

How Much Should You Save for Retirement?

Determining how much to save for retirement depends on your personal goals and lifestyle aspirations. While specific needs vary, financial experts, including the OECD and leading pension providers, recommend saving 12-15% of your annual income.

This figure is based on research suggesting that to maintain your standard of living in retirement; you’ll need to replace around 70-80% of your pre-retirement income. While the UK State Pension offers a baseline income (approximately £10,600 per year as of 2024/25), it’s often insufficient. Consistently saving within this range—starting as early as possible—helps to bridge the gap and ensures a comfortable and secure retirement.

By setting clear goals and starting early, you can use compound growth to make achieving your retirement dreams more manageable.

Overcoming Common Challenges in Pension Planning 

Self-employed professionals often focus on growing their business, leaving little time for long-term financial planning. Irregular income can also make planning challenging.

Seeking expert advice and making regular investments can help overcome these obstacles.

Working With a Financial Advisor for Pension Planning 

Navigating pension planning as a self-employed professional can be overwhelming. A financial advisor can provide tailored advice based on your goals, tax situation, and financial circumstances.

At Ifamax Wealth Management, we specialise in helping self-employed individuals and business owners create effective retirement strategies. Whether you're starting fresh or need to optimise existing plans, we're here to support you every step of the way.

Conclusion

Pension planning is crucial for self-employed professionals to secure a comfortable and worry-free retirement. You can build a solid financial future by starting early, exploring flexible options, and leveraging tax benefits.

If you’re ready to take control of your retirement planning, contact us today for a personalised consultation.

Risk warning

This article is distributed for educational purposes only and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy, or investment product. Reference to specific products is made only to help make educational points and does not constitute any form or recommendation or advice. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.  

As business owners, your time is often consumed by the day-to-day demands of managing your team, pursuing growth opportunities, and building relationships with clients. Unfortunately, this means financial and tax planning takes a back seat.

Whether you're navigating the best way to extract income from your business, preparing for succession planning, or managing significant tax liabilities, financial and tax planning are closely intertwined.

At Ifamax Wealth Management, we’ve supported business owners and their accountants for over 20 years. We understand the unique challenges you face and have the expertise to help. Download our free guide for business owners today to explore actionable strategies tailored to your needs.

What is Tax Planning?

Tax planning involves proactively managing your financial affairs to reduce personal and business tax bills. This includes strategies to minimise corporation tax, optimise cash flow, and maximise available allowances, all while ensuring compliance with the latest tax laws.

Effective tax planning isn't just about saving money—it's about achieving long-term financial health and peace of mind for you and your business.

Why is Tax Planning Important for Businesses?

Tax planning is essential for reducing your tax burden and ensuring the financial health of your business. At Ifamax Wealth Management, we work closely with you and your accountant to craft bespoke strategies that align with your goals.

Key areas of focus include:

• Optimising income extraction: Whether through salary, dividends, or a combination.

• Maximising allowances and investments: From pension contributions to tax-efficient solutions like ISAs, VCTs, EIS, and Business Relief.

• Mitigating risks: Ensuring adequate insurance to protect against key-person risk and safeguarding your family's financial future.

By partnering with us, you can concentrate on growing your business while we focus on optimising your financial outcomes.

The Risks of Not Having a Tax Plan

Failing to plan for taxes can lead to significant financial risks, including:

• Overpaying taxes due to missed deductions or allowances.

• Facing large, unexpected tax bills.

• Lacking a strategy for succession planning or business sales.

• Exposing your family and business to financial liabilities in unforeseen circumstances.

Without a proactive tax plan, you could leave money on the table or put your financial stability at risk.

Key Tax Planning Strategies for Businesses

Effective tax planning involves implementing strategies tailored to your unique circumstances. Here are a few examples:

1. Income strategies: Deciding on the best mix of salary and dividends for income extraction.

2. Pension contributions: Leveraging contributions to reduce taxable income while securing your retirement.

Every business is unique, and understanding your situation is key to finding the most effective solutions.

How to Start Tax Planning for Your Business

At Ifamax Wealth Management, we believe in a holistic financial planning approach that integrates personal and business needs. This ensures the best possible outcomes for your financial position and long-term goals.

Our process includes:

• Conducting a comprehensive financial assessment.

• Identifying opportunities to reduce tax liabilities.

• Developing personalised strategies in collaboration with your accountant.

The first step towards structured tax planning can lead your business to sustainable success.

Conclusion

Tax planning is a vital component of running a successful business. By proactively managing your tax obligations, you can reduce financial stress, protect your assets, and create a stable foundation for growth.

At Ifamax Wealth Management, we specialise in helping business owners like you navigate the complexities of tax planning. Schedule a consultation today to explore how we can support your financial success.

Download Our Free Guide or Book a Consultation Now

Risk warning

This article is distributed for educational purposes only and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy, or investment product. Reference to specific products is made only to help make educational points and does not constitute any form or recommendation or advice. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.  

Past performance is not indicative of future results and no representation is made that the stated results will be replicated.

As a business owner, we know you are busy building, managing, and maintaining your company. That often means your financial planning takes a back seat. Some of the many challenges that we see company owners face include, but are not limited to:

• Income Extraction

• Business Sale/Succession Planning

• Funding Pensions

• Adequate Insurance

• Ongoing Large Tax Bills

• Time to Review Finances

• Tax Bill Panics

Tax planning is an essential part of your financial plan. Understanding the intricacies and how they might apply to your situation can take time and effort. We understand these challenges because we work with business owners and can help you navigate the different options to tailor a unique plan that matches your needs.

Why Tax Planning Matters for Small Businesses

Effective tax planning can lead to substantial benefits for small business owners. Whether it’s extracting income and dividends in the most tax-efficient way or optimising pension contributions, careful planning makes a difference. For example:

• Reducing Corporation Tax: Employer pension contributions are tax-deductible, lowering your overall corporation tax liability.

• Protecting Your Family and Business: Proper planning for directors’ insurance can safeguard your family and ensure your business’s continuity should the unexpected happen.

On the flip side, unpreparedness can create significant challenges, including last-minute tax bill panic, cash flow issues, and unnecessary stress. Avoiding these pitfalls requires a proactive approach to financial and tax planning.

Keeping Your Financial Records Organised 

Keeping accurate and organised financial records is a cornerstone of effective tax planning. This involves:

• Recording Allowances and Reliefs: Ensure you track and document all applicable tax allowances.

• Using a Paperless System: Digital records make storing important documents like receipts and certificates easier.

• Avoiding Missed Opportunities: Poor record-keeping can lead to missed claims or challenges during HMRC audits.

Good record-keeping ensures you’re always prepared to substantiate your claims and benefit fully from available tax reliefs.

Keeping Your Allowances and Reliefs 

Investment Allowances

• Annual Investment Allowance (AIA): Claim 100% tax relief on qualifying plant and machinery up to £1 million annually.

• Research & Development Tax Relief: Deduct a significant percentage of qualifying R&D expenditure and, if eligible, claim tax credits for innovation.

Tax Reliefs for Selling the Business

• Business Asset Disposal Relief: Pay a reduced Capital Gains Tax (CGT) rate of 10% on qualifying business sales.

• Incorporation Relief: Defer CGT when transferring your business to a limited company.

• Roll-Over Relief: Defer CGT by reinvesting sold assets into qualifying new assets.

Other notable reliefs include the Small Profits Rate, Employment Allowance, and Structures and Buildings Allowance, all of which can reduce tax burdens and encourage growth. Planning tools like Business Relief are helpful when preparing for a sale.

Maximise Pension Contributions 

Pension contributions are an excellent way for business owners to save tax-efficiently.

• Employer Contributions: These are deductible against corporation tax, reducing tax liability while helping you build long-term financial security.

• Tax Efficiency: Pension contributions reduce taxable income while securing a future income stream.

Understanding the nuances of pension tax relief can be complex. Getting it right optimises your tax position and ensures compliance with current legislation.

Plan for VAT and Corporation Tax 

While VAT and corporation tax planning typically fall within your accountant’s remit, business owners are crucial in providing accurate data and understanding how allowances impact overall tax liability.

• VAT Compliance: Maintain accurate records and ensure timely submissions to avoid penalties.

• Corporation Tax Efficiency: Use allowances such as the AIA and employer pension contributions.

Avoid Common Tax Mistakes 

Small business owners often need help with tax planning. Here are frequent errors and how to avoid them:

Frequent Mistakes

• Not Separating Personal and Business Expenses: Mixing accounts can make it harder to claim legitimate expenses.

• Missing Tax Deadlines: Late submissions lead to penalties and interest.

• Overlooking Allowable Expenses: Home office costs, mileage, and travel should be more recognised.

Actionable Tips

• Use accounting software to track income and expenses.

• Set reminders for tax deadlines to ensure timely submissions.

• Regularly review allowable expenses with your accountant or adviser.

Leverage Professional Advice 

Tax laws are complex and constantly changing, which makes consulting with professionals a crucial step for small business owners. Here’s how expert advice can help:

• Stay Updated: Keep up with changes in tax legislation and avoid compliance risks.

• Make Informed Decisions: Identify tax-saving opportunities tailored to your business’s circumstances.

• Strategic Planning: Develop a long-term financial plan incorporating personal and business goals.

At Ifamax Wealth Management, we specialise in helping small business owners navigate the complexities of tax planning. We support your journey from income extraction strategies to pension contributions and succession planning.

Ready to Simplify Your Tax Planning?

Contact Ifamax Wealth Management today to start building a tax-efficient plan tailored to your business and personal goals.

Risk warning

This article is distributed for educational purposes only and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy, or investment product. Reference to specific products is made only to help make educational points and does not constitute any form or recommendation or advice. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.  

Past performance is not indicative of future results and no representation is made that the stated results will be replicated.

Pension planning is often overlooked, especially as we establish our careers or build our businesses. At every stage of the journey, there is usually little time to focus on planning, yet this sets the foundation for when we can retire and the level of income we can expect to receive.

At Ifamax, we work with business owners and professionals to take away the stress of worrying about the future and to use the most tax-efficient ways to save for retirement.

What is Pension Planning?

Pension planning prepares for financial security during retirement by building a sufficient retirement fund to deliver the needed income. Everyone’s needs differ, and we will work with you to ensure you make the most tax-efficient savings.

There are different types of schemes, including:

• Workplace pensions: You and your employer make contributions, often with the option to increase your own contributions.

• Personal pensions are private savings plans to which you contribute. They are sometimes called Self-Invested Personal Pension Schemes (SIPPs).

• State pensions: Funded through National Insurance contributions, the State Pension provides a guaranteed income from the government. The full amount typically requires 35 years of contributions.

• Defined benefit schemes: Employer-provided schemes that guarantee a set income in retirement based on your salary and years of service.

Pension planning involves understanding all the different schemes you may have and creating a tailored plan to help you transition into retirement smoothly.

The Benefits of Starting Early with Pension Planning

tarting your pension planning early can significantly impact your financial future. Here’s why:

• The Power of Compounding: The earlier you begin, the longer your money has to grow. For example, saving £200 a month from age 25 could grow to over £150,000 by retirement, thanks to compound interest.

• Tax Relief Advantages: Pension contributions often come with tax relief, meaning your savings go further. For instance, higher-rate taxpayers can save £40 for every £100 contributed.

• Avoiding the Cost of Delay: Starting later means significantly higher contributions are needed to achieve the same outcomes, increasing financial stress.

The graph below illustrates how starting early maximises your savings and reduces the pressure of catching up later.

Key Types of Pensions Explained  

Workplace Pensions 

These are schemes that all employers must offer. The main advantage is that your employer will also contribute to your retirement fund. You can increase your contributions above the minimum requirement.

Personal Pensions  

Personal pensions, including Self-Invested Personal Pensions (SIPPs), are private savings plans. They are ideal for self-employed individuals, business owners, or professionals seeking flexibility beyond workplace pensions.

State Pensions  

The State Pension is funded through National Insurance contributions. Your entitlement and the amount you receive depend on the total number of qualifying years of contributions, with 35 years typically required for the full amount.

How to Get Started With Pension Planning

Financial planning is the key to successful pension planning. It starts with understanding your aspirations and goals, assessing your savings, and identifying the best strategies to achieve your desired outcomes. At Ifamax, we’ll guide you every step of the way to create a plan that works for you.

Common Mistakes in Pension Planning and How to Avoid Them

The greatest challenge for many professionals and business owners is finding the time to focus on pensions. At Ifamax, we understand your unique situation and will:

• Plan early to maximise tax benefits.

• Regularly review your pensions to adjust for life changes and evolving goals.

• Ensure all your plans align to deliver the future you envision.

The key to avoiding mistakes isn’t about perfection; it’s about assessing your current position and planning for what lies ahead. The earlier you start, the better your chances of achieving your desired outcomes.

Why Choose Ifamax for Pension Advice?

Ifamax has been helping clients for over 20 years. We work with business owners and professionals to create tailored financial plans. Four of our six advisers are under 40, so we’ll be here to support you long-term.

Don’t wait to plan for your future. Contact Ifamax today and let us help you secure the retirement you deserve.

Risk warning

This article is distributed for educational purposes only and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy, or investment product. Reference to specific products is made only to help make educational points and does not constitute any form or recommendation or advice. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.  

Past performance is not indicative of future results and no representation is made that the stated results will be replicated.

Planning for retirement is one of the leading financial goals many of us face.

According to a September 2023 report by the Financial Services Compensation Scheme (FSCS), nearly 70% of UK adults worry about whether their savings will be enough to support them in later life.

It’s no surprise that one of the most common questions people ask is:

“Will I have enough income to enjoy a comfortable retirement?”

The Million-Pound Question: How Much is Enough?

The answer depends on several factors.

External influences like life expectancy, inflation, tax, and market performance play a significant role. But equally important are personal considerations:

• Your expected retirement income and spending needs

• Your current savings and investments

• Your comfort level with financial risk

• Your personal values, aspirations, and lifestyle goals

For example, one person may prioritise travelling in retirement, while another may focus on maintaining a simple, quiet life. This means the amount of money you need to retire comfortably can vary significantly from one person to the next.

Using Benchmarks to Guide Your Goals

If you’re unsure where to start, the first thing you should do is get a better understanding of your current expenditure. You can find a template to help you work this out here https://www.moneysavingexpert.com/banking/budget-planning/. Your personal situation is going to be the best benchmark you can use for accurate planning going forwards as expenditure and the definition of ‘comfortable lifestyle’ varies widely from person to person.

You can also refer to the Retirement Living Standards developed by the Pensions and Lifetime Savings Association (PLSA) can provide a helpful guide (but shouldn’t be seen as the answer for your personal circumstances!).

These standards outline three levels of annual retirement expenditure based on lifestyle choices:

• Minimum: Covers essential needs.

• Moderate: Adds more flexibility and comfort.

• Comfortable: Includes luxuries like international travel and dining out.

For instance, this research indicates that a comfortable lifestyle requires an estimated £43,100 annually for a single person or £59,000for a couple (excluding taxes).

Is a Comfortable Retirement Achievable?

For many, the state pension will be crucial to their income. The full state pension currently provides around £11,500 per year for a single person or £23,000 for a couple. Based on the assumptions behind this research, to achieve a moderate retirement, you’d need to generate an additional £20,000 annually, rising to £36,000 for a comfortable retirement.

But this isn’t the whole story — tax needs to be factored in. A couple would need approximately £48,000 gross annual income to achieve a moderate income after tax. For a comfortable retirement, this figure increases to £68,000.

To generate these income levels sustainably, financial planners often recommend withdrawing no more than 4% of your retirement pot annually. This means:

• A couple aiming for a moderate retirement would need around £625,000 in savings and investments.

• For a comfortable retirement, they’d need approximately £1.125 million.

However, what feels like a comfortable lifestyle to one person might feel modest to another, and therefore, although these figures might be a guide, they shouldn’t be assumed to be the answer. Your income goals and the assets needed will reflect your specific aspirations and needs, which means they could be lower or higher than the figures generated by this research. The other important factor is how your savings and investments are held – money held in an ISA will be tax free at the point of withdrawal, whereas pension funds will be taxable at your marginal tax rate (after tax free cash is taken). Paying 20% or 40% tax (or not) will have a substantial impact on the amount of savings you require to fund your retirement!

Taking the Stress Out of Retirement Planning

At Ifamax Wealth Management, we believe retirement planning is about more than just hitting a target generated by generic research. These figures can feel overwhelming, leading many to questions around whether retirement is achievable.

Our approach focuses on creating a personalised, sustainable strategy tailored to your unique circumstances. Planning effectively lets you enjoy peace of mind, knowing your income will last throughout your retirement years.

Key strategies include:

• Tax-efficient savings vehicles: ISAs and pensions can help reduce tax liabilities, boosting your retirement income or lowering the amount you need to save.

• Ongoing advice: Regular reviews ensure your plan stays on track and adapts to changing circumstances.

Navigating a Changing Landscape

The retirement landscape is constantly evolving. For example, the Financial Conduct Authority (FCA) recently reviewed retirement income sustainability, influencing how advisers approach long-term planning.

Staying ahead of these changes is crucial; partnering with an expert adviser can make all the difference.

Partner with Ifamax Wealth Management

Planning for retirement doesn’t have to be stressful. At Ifamax Wealth Management, we specialise in helping clients build retirement pots that align with their needs and aspirations. From maximising tax-efficient savings to ensuring sustainable withdrawals, our expert team is here to guide you every step of the way.

With our support, you can confidently approach retirement, knowing your future is secure.

Risk warning

This article is distributed for educational purposes only and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy, or investment product. Reference to specific products is made only to help make educational points and does not constitute any form or recommendation or advice. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.  

Past performance is not indicative of future results and no representation is made that the stated results will be replicated.

We thought it would be helpful to send some initial thoughts following the budget. Business owners and those with significant pension assets are now faced with a completely different situation, which could affect ongoing planning. 

Here is a summary of some of the most significant changes announced.

Pensions

Rumours about changes to tax-free cash, pension tax relief, and the lifetime allowance were unfounded. Instead, the government announced it would bring unspent pension pots into the inheritance tax (IHT) scope starting April 2027.

This is a huge change for those with pension assets and will likely lead to a massive increase in tax revenue over the coming years. The usual spouse/civil partner exemption should still apply, which makes it particularly important to have an up-to-date expression of wish on file.

Strategies to improve your tax situation are already being developed internally, and we will communicate these with you individually.

Business Asset Disposal Relief (BADR)

Business Asset Disposal Relief (BADR), formerly Entrepreneurs Relief, will remain at 10% this tax year before rising to 14% on 6 April 2025 and 18% from 6 April 2026. The lifetime limit will be maintained at £1 million, while the lifetime limit of Investors’ Relief will be reduced from £10 million to £1 million.

This change will result in business owners paying considerably more tax when selling their businesses. Many may consider bringing forward a disposal before the 18% kicks in.

Agricultural relief and business relief

This is a tax on the sale of farms and unlisted businesses (typically family-owned assets). Historically, these have been able to pass to the next generation without a tax charge. The logic behind this was that the businesses would then be able to continue. If a large tax charge is due, the business asset may need to be sold if no other assets are available to pay the tax charge.

From 6 April 2026, 100% relief will remain for the first £1 million of combined agricultural and business assets. Above £1 million, the relief will be 50%; this would mean IHT at 20% above £1 million. Thus, it is more important to make a plan to pay any potential inheritance tax bills using alternative assets.

Capital Gains Tax (CGT)

While the CGT threshold (£3,000) remains unchanged, tax rates will increase. The new rates take effect immediately. 

• The lower rate will rise from 10% to 18%.

• The higher rate will increase from 20% to 24%.

This aligns CGT rates paid on non-property and property assets.

As always, we will consider these new rates before making any capital gains chargeable decisions on clients' investments.

Second Homes

The Additional Dwelling Stamp Duty Land Tax (SDLT) rate will increase from 3% to 5% starting immediately. This will affect those looking to enter or increase their holdings in the buy-to-let market or purchase a holiday home.

Summary

The announced changes need to be passed through legislation as part of a new finance bill. We should find out more about the intricate details of each change as the days and weeks pass. The changes highlight the importance of having an up-to-date financial plan. We will assist our clients with any planning that needs to be done following these changes. 

Risk warning

This article is distributed for educational purposes only and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy, or investment product. Reference to specific products is made only to help make educational points and does not constitute any form or recommendation or advice. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.  

Past performance is not indicative of future results and no representation is made that the stated results will be replicated.

Understanding the distinction between wealth management and financial planning is essential when managing your finances. While both services help individuals achieve financial stability and growth, subtle yet significant differences exist. Wealth management is often seen as a subset of financial planning, serving clients with more complex needs and higher levels of wealth.

In this article, we’ll explore the key differences between the two and why the advice you need will depend on your financial situation.

Complexity of Advice

Financial Planning

At its core, financial planning is about setting goals and achieving life milestones. It typically focuses on managing income, debt, and savings to ensure long-term financial security. This type of service is particularly well-suited for individuals who may be balancing multiple financial priorities, such as paying off a mortgage, raising a family, and saving for retirement.

Financial planners help clients with straightforward financial products such as ISAs (Individual Savings Accounts), pensions, mortgages, and protection policies. Their primary goal is to ensure that their clients have a solid foundation for the future by helping them plan for crucial life events.

For example, a mid-career professional in their 30s or 40s might seek the advice of a financial planner to balance repaying student loans, saving for their children’s education, and planning for retirement. In this scenario, the advice is often practical and goal-oriented, focusing on medium- to long-term financial goals.

Wealth Management

Wealth management, on the other hand, offers a more comprehensive and ongoing service for individuals or families with substantial assets. The advice tends to be more complex, involving sophisticated strategies beyond typical financial planning.

Wealth managers focus on wealth accumulation, preservation, and tax efficiency. This may involve working alongside other professionals, such as solicitors and accountants, and providing solutions for estate planning, risk management, and even philanthropic planning.

For instance, a business owner who has sold their company for £5 million would require wealth management to oversee their investments, mitigate tax liabilities, and protect their wealth for future generations. Wealth management clients often look beyond their financial security, focusing on ensuring a lasting financial legacy.

Client Profile

Another key difference between financial planning and wealth management is the typical client profile. While both services cater to individuals and families, the complexity and scale of their financial needs often differ.

Financial Planning

Financial planning is designed for many clients, regardless of their net worth. The typical client might be someone in the early stages of their career or family life who wants to establish a financial plan to help them achieve specific goals.

For example, a young family might seek the guidance of a financial planner to create a savings plan for their children’s education while also managing everyday expenses and contributing to their pension. Their needs are straightforward, and they want reassurance that their financial future is on track.

Wealth Management

Wealth management tends to cater to high-net-worth individuals (HNWIs) or families with more complex financial needs. These clients often have large, diversified asset portfolios that may include multiple properties, business interests, or inherited wealth. As such, their financial needs are more intricate, requiring tailored strategies to manage risk, maximise returns, and ensure tax efficiency.

A wealth management client might be a high-earning professional, such as a barrister or a business owner, who needs ongoing advice to manage investments, ensure tax efficiency, and develop a long-term plan for passing on wealth to future generations.

Flexibility and Life Stages

It’s important to note that the distinction between financial planning and wealth management isn’t always static. Clients may begin with financial planning but move into wealth management as their financial situation evolves.

Life Changes:

For example, a mid-career professional might need help with budgeting, saving, and retirement planning. However, their financial situation becomes more complex as they advance in their career, receive an inheritance, or sell a business. They may transition to wealth management for more significant investments, estate planning, and tax optimisation.

This highlights the importance of working with financial advisors who can adapt their services as your needs change. Whether starting with a financial plan or transitioning to wealth management, the right advisor can guide you every step of the way.

Conclusion

Both financial planning and wealth management play critical roles in securing your financial future, but they serve different needs. Financial planning is ideal for individuals looking to achieve specific financial goals and establish a foundation for the future. On the other hand, wealth management is designed for those with more complex financial circumstances, offering a broader range of services to preserve and grow wealth over time.

As your financial situation changes—whether through career advancement, business success, or inheritance—you may find that your needs shift from financial planning to wealth management. Partnering with the right advisor can ensure that your financial strategy evolves with you, providing peace of mind and security for you and your family. Ifamax is a wealth management firm in Bristol that offers both financial planning and wealth management. Contact us for more information. 

Managing wealth effectively is critical to achieving long-term financial success in today's fast-paced financial world. Whether aiming to grow your assets, secure your retirement, or leave a financial legacy, understanding the value of wealth management can set you on the right path. But what exactly is wealth management, and why is it so important?

This article will explain the basics of wealth management, what wealth managers do, and how their expertise can significantly impact your financial future.

Wealth Management Explained 

Wealth management is a comprehensive service that goes beyond traditional financial planning. It encompasses tax planning, estate planning, and more. Wealth management focuses on preserving and growing your wealth over time, helping you achieve financial security and meet your life goals. It's particularly relevant for high-net-worth individuals or families requiring a tailored, strategic financial approach.

What Does a Wealth Manager Do?

A wealth manager plays a crucial role in developing and executing a personalised financial strategy. They assess your financial situation, understand your objectives, and offer advice on investments, savings, taxes, and estate planning. Wealth managers also coordinate with other professionals, like tax advisors and solicitors, to ensure all aspects of your financial life are optimally managed. Their goal is to help you grow your assets while protecting your wealth for the future.

Understanding the Importance of Wealth Management

The importance of wealth management cannot be overstated. It provides the expertise needed to navigate the complexities of managing significant assets. Without professional guidance, individuals may miss key growth opportunities, fail to minimise tax liabilities or be unprepared for market risks. Wealth managers offer tailored strategies that help clients preserve their wealth and take advantage of market opportunities, ensuring that financial goals are met with minimal stress and maximum efficiency.

Financial Goals for Long-Term Success

Setting clear financial goals is a cornerstone of successful wealth management. Wealth managers use the SMART (Specific, Measurable, Achievable, Relevant, Time-bound) framework to help clients establish realistic objectives that align with their personal and financial aspirations. Ifamax Wealth Management employs this approach to guide clients in planning for long-term success. Whether saving for retirement, purchasing a second home, or preparing for future generations, your wealth manager will create a tailored strategy that reflects your unique goals and timeline.

Maximising Savings and Investment Opportunities

Regular savings and intelligent investment strategies are the building blocks of wealth creation. Wealth managers bring the expertise to identify and implement the most effective saving and investment options based on your financial objectives. Whether spotting high-growth opportunities or recommending tax-efficient savings vehicles, their experience allows them to help you capitalise on the best opportunities. This professional insight makes wealth management essential for optimising your financial strategy.

Risk Management with Wealth Management

Risk is inevitable in any financial plan, but wealth managers are skilled at identifying and mitigating various risks, including market, inflation, and longevity. They develop comprehensive plans that balance these risks through assets, emergency funds, insurance, and tax-efficient strategies. By addressing potential risks upfront, wealth managers help protect your wealth over the long term and ensure your financial plan remains resilient.

Emotional Benefits of Hiring a Wealth Manager

Beyond the financial benefits, wealth management offers significant emotional peace of mind. Managing an extensive portfolio or preparing for important life events can be stressful, but wealth managers remove much of the burden by handling the complexities for you. Knowing that your financial future is in expert hands allows you to focus on enjoying life, confident that your wealth is managed effectively and strategically.

Trust Ifamax with Your Financial Future

Is wealth management right for you? At Ifamax Wealth Management, we’re committed to helping you secure a prosperous future. Our wealth management specialists are available for a free, no-obligation consultation to discuss your financial needs. Let us guide you in achieving financial peace of mind—contact us today to get started.

By its very nature, the investing industry is full of differing views on how one ought to invest their hard-earned cash. One of the more polarising debates is whether an investment in gold makes good sense. The debate tends to flare up each time gold experiences a rapid growth in value, such as in the last couple of years.

The pros

Gold has long been prized for its lustre and durability in jewellery, but its uses extend beyond this. As an excellent conductor, highly malleable, stable at high temperatures, and resistant to rust, gold is invaluable in industries like electronics, medicine, and aerospace. Its enduring demand contributes to its value and appeal to investors, as gold has retained purchasing power across centuries. For instance, in gold terms, the pay of a Roman centurion 2,000 years ago is comparable to that of a modern U.S. army captain[1].

Other positives are that gold offers uncorrelated returns to traditional assets such as bonds and equities, providing potential diversification benefits. Many see gold as an ‘Armageddon hedge’, expecting strong returns when faith in the financial system is shaken. Unlike many investment opportunities, gold is a relatively simple concept – being a lump of metal with a market value – and is easily accessed via physical purchase or low-cost open-end funds.

The cons

Gold prices are a function of supply and demand. Investors in gold speculate that others will desire it even more avidly in the future. Unlike traditional asset classes, gold produces no income stream [2], it does not pay dividends and usually costs owners to store and insure it. Many assume its long term expected return to sit somewhere near cash.

The chart below shows the increase in value of 1 ounce of gold from 1926 to August 2024, rising from around $20 to just over $2,500. Investing the same $20 in global equities during this period would have delivered a substantially superior outcome, nearly 50 times the cumulative gain.

Data source: Gold.org. Inflation: US CPI. Albion World Stock Market Index. https://smartersuccess.net/indices

Investors seeking an Armageddon hedge face a dilemma: while many opt for gold-backed funds or ETFs due to the challenges of storing physical gold, relying on the financial system to hedge against its collapse seems contradictory. Owning physical gold has its own issues due to its bulk and other risks such as theft. 

Though gold is often promoted as an inflation hedge, the evidence is weak. While it has maintained value over millennia, its performance over more relevant timeframes is less impressive—gold has yet to recover its February 1980 inflation-adjusted high in USD terms and saw an 83% drop in value over the following two decades[3].

The portfolio

Assessing whether gold belongs in your investment portfolio is the job of our investment committee. Each asset class must fill a specific role in your portfolio and is weighed up against the alternatives. In the case of gold, whilst it has some favourable characteristics, superior options exist. 

As Warren Buffet succinctly puts it:

"If you own one ounce of gold for eternity, you still only own one ounce at its end"

Warren Buffet (2012)

[1] Erb, Claude B. and Harvey, Campbell R., The Golden Dilemma (May 4, 2013). Available at SSRN: http://ssrn.com/abstract=2078535 or http://dx.doi.org/10.2139/ssrn.2078535

[2] Whilst gold itself does not produce an income stream, financial institutions may try and claw back some of the storage costs through gold lending revenues.

[3] Data source: Gold.org. Inflation: US CPI.

Risk warnings
This article is distributed for educational purposes only and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy, or investment product. Reference to specific products is made only to help make educational points and does not constitute any form or recommendation or advice. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.  

Past performance is not indicative of future results and no representation is made that the stated results will be replicated.

Choosing the appropriate financial help can be crucial to managing your finances effectively. In the UK, financial advice professionals have three main titles: financial advisers, financial planners, and wealth managers. While the terms may sound similar, some distinctions exist, particularly between financial planners and wealth managers.

Financial planner vs wealth manager?

Financial planners and wealth managers often perform overlapping roles, but wealth managers typically offer a more holistic approach. Wealth management involves more complex planning, especially regarding taxation, estate planning, and investment strategies. Wealth managers usually work with clients with more substantial assets and diverse financial needs, such as business owners, barristers, or individuals in high-net-worth occupations.

How Much Money Do I Need to Work With a Wealth Manager?

According to the Financial Times in August 2023, the typical range for individuals seeking wealth management services is between £250,000 and £5 million in investable assets.

Beyond this range, private banks often take over. This threshold seems consistent over time and across regions, with similar figures noted in studies, though some data, like CEG’s chart from 2005, are based on the US market.

Signs You May Need a Wealth Manager 

The profile of a typical wealth management client includes successful individuals such as business owners, barristers, professionals in the entertainment industry, and partners in firms. 

However, wealth isn't limited to those who have built their fortunes through income or business. Inherited wealth is becoming increasingly significant, leading to more individuals with complex financial needs as they come into money from family members.

While the primary source of wealth can vary, one consistent trend is that real wealth often accumulates with age. Those over 55 typically have more substantial assets, partly because of life stages, accumulated investments, and inheritance.

What are the Advantages of Using a Wealth Manager? 

The advantages of a wealth manager include:

1. Holistic Approach: Wealth managers offer comprehensive financial planning that covers a wide range of services, including investment management, tax planning, and estate planning.

2. Expertise in Complex Needs: They specialise in dealing with more complicated financial situations, particularly for clients with substantial assets, business interests, or intricate taxation matters.

3. Tailored Advice: Wealth managers provide personalised strategies for high-net-worth individuals and specific client profiles, such as business owners and barristers.

4. Long-Term Planning: They focus on long-term financial health, helping clients navigate various life stages and ensuring continuity through different generations.

5. Navigating Inherited Wealth: Wealth managers assist individuals who inherit wealth, offering guidance on effectively managing and growing these assets.

Wealth Management is a Changing Industry

The wealth management industry is facing a shift. Wealth is becoming more concentrated among the older generation, and advisers are also ageing. This creates a unique challenge for younger clients seeking long-term financial relationships. Finding a firm with a multi-generational team could be a strategic consideration for those looking for a financial partner to see them through different life stages.

Is Wealth Management For You?

Wealth Management offers a comprehensive approach to financial planning, addressing more complicated financial needs like taxation and estate planning. Generally, this service is most suitable for those with investable assets exceeding £250,000 and who fit specific profiles, including business owners, barristers, and high-net-worth occupations. However, with an increase in inherited wealth, a new generation is also seeking the expertise of wealth managers to navigate their financial futures. Ifamax are wealth managers in Bristol, if you would like to find out more about or services, please contact us. 

Wealth management is often perceived as a service reserved for the rich and famous. However, with the rapid rise in house prices and the increasing complexity of financial planning, more people need a wealth manager.

Typically, those with £350,000 or more in assets (excluding their primary residence and other property) could benefit from a wealth manager. This includes individuals in the UK's top 8th, 9th, and 10th wealth deciles

What is Wealth Management? 

Wealth management is a comprehensive service encompassing several key components designed to help individuals and families manage, grow, and protect their wealth. These components include:

Investment Management: This involves creating and managing a portfolio of investments tailored to the client’s goals, risk tolerance, and time horizon.

• Financial Planning: Setting financial goals and developing strategies to achieve them.

• Tax Planning: Minimising taxes on personal income, investments, and estates to maximise wealth preservation.

• Estate Planning: Ensuring the transfer of wealth in a manner that is fair, efficient, and under the client's wishes, often focusing on minimising tax liabilities.

• Risk Management: Implementing strategies to mitigate financial risks through insurance and diversification.

• Retirement Planning: Planning to ensure a sustainable income during retirement.

• Philanthropy: Aligning charitable giving and philanthropy with the client’s values and financial goals.

While inheriting wealth is one scenario that might lead someone to seek out wealth management services, several other types of individuals could benefit from such expertise.

Who Needs a Wealth Manager?

Business Owners & Entrepreneurs 

Business owners and entrepreneurs often face unique financial challenges, such as managing business finances, planning succession, and optimising tax strategies.

These individuals must balance their personal and business finances while planning for long-term growth and retirement. Wealth managers work closely with other professionals, such as solicitors and accountants, to help business owners navigate these complexities and secure their financial future.

Successful Professionals 

High-earning professionals, including doctors, lawyers, barristers, and executives, typically have significant incomes but limited time to manage their finances effectively. A wealth manager can assist these professionals with investment strategies, tax planning, retirement planning, and protecting their wealth through comprehensive estate planning. By delegating these tasks to a wealth manager, successful professionals can focus on their careers while ensuring their financial affairs are in order.

High-Net-Worth Individuals (HNWIs)

Individuals with substantial assets require sophisticated investment strategies, estate planning, and tax optimisation. Wealth managers provide personalised financial services that help HNWIs grow, preserve, and efficiently transfer their wealth. This includes managing complex investment portfolios, planning for future generations, and ensuring that tax strategies are in place to protect their wealth from unnecessary erosion.

Older Individuals (Accelerating Wealth Transfer) 

As the older generation, particularly the postwar generation, begins transferring wealth, there is a growing need for expert advice on handling these assets. Wealth managers assist with estate planning, tax strategies, and the transition of wealth to heirs, ensuring that the transfer is efficient and aligns with the client's goals.

Wealth is often concentrated in real estate, and the sale of homes can release significant funds. Wealth managers guide heirs on reinvesting these funds in alignment with their overall financial goals, whether in financial assets, additional real estate, or other investment opportunities.

Lottery Winners 

Suddenly, acquiring a large sum of money, as is the case with lottery winners, can be overwhelming. Without proper management, newfound wealth can quickly dissipate. A wealth manager can help lottery winners create a plan to preserve their wealth, invest wisely, and make informed decisions about spending, philanthropy, and tax liabilities. This guidance ensures that the windfall leads to long-term financial security rather than short-lived prosperity.

How Can Ifamax Help With Wealth Management? 

Since 2004, Ifamax Wealth Management has been helping clients navigate the complexities of managing their wealth. We offer a comprehensive wealth management service to help individuals and families manage, grow, and protect their wealth. Today, we manage assets for more than 300 families, guiding them through every stage, from wealth accumulation to distribution.

Our primary aim is to protect wealth, whether for a secure retirement or to ensure it can be passed on to future generations. Whether you are a business owner, a barrister, a lottery winner, or an individual looking to manage wealth transfer, we tailor our services to meet your unique needs.

Our services include investment management, financial planning, tax planning, estate planning, risk management, retirement planning, and philanthropy.

 A unique aspect of our service is our free second opinion consultation. We offer to review your current financial plan and provide a no-cost consultation to help you identify areas for improvement. If you would like to arrange a consultation today, please get in touch with us.

Retirement planning extends beyond managing assets. It involves establishing long-term relationships with financial advisers who can guide clients through the complexities of retirement.

However, the industry faces significant challenges, including recruiting young talent and increasing legislative burdens. This has led to concerns about the sustainability of financial advisers themselves. 

The State of Financial Advisers in the UK

According to Statista, there are approximately 5,000 financial adviser businesses in the UK, employing around 30,000 advisers. A survey by Investec Wealth and Investment revealed that 20% of those using advisers are very concerned about the retirement of their adviser. This concern stems from a combination of factors, including:

Aging Workforce: There is a noticeable decline in younger advisers and a rise in those over 60, highlighting a potential future shortage of advisers.

Recruitment Challenges

The industry needs help attracting young people, making ensuring a steady influx of new talent difficult. This article from Money Marketing provides insight. It's not a glitzy profession, and there is no set pathway. Good firms nurture young people through the different stages of a career in financial planning, but it is often who you know that leads to these opportunities. 

Legislative Burdens

Increasing regulatory requirements add to financial advisers' pressures, making the profession less appealing to newcomers.

These issues are compounded by the trend of consolidators—firms that buy other financial planning practices—tempting experienced advisers away from independent practices. According to a report by NextWealth, there were 133 publicly disclosed acquisitions in 2023. Once a firm is sold, it is unlikely that the client will enjoy the same relationship they had before.

Importance of Adviser Sustainability

The sustainability of a financial adviser is crucial for clients, particularly those planning for retirement. A sustainable adviser ensures continuity and stability in financial planning, which is essential for long-term retirement strategies. The relationship built over many years between a client and their adviser can significantly impact the effectiveness of retirement planning.

Financial planning is fundamentally about trust, built up over many years. Someone new will take over if a financial planner sells their business and retires. Some of these businesses are sold to large consolidators, and the relationship changes from personal to corporate. A whole new process of trust has to start at a time when people just want to relax and enjoy life. 

This is essentially reflected in the Investec research. Good firms look to see how they can pass the business on to their employees to ensure continuity and sustainability. 

Ifamax's Commitment to Sustainable Financial Advising

Ifamax Wealth Management, established in 2004 by Max Tennant, is an independent financial planning firm committed to advisor sustainability.

Unlike many firms facing the challenges of an ageing workforce, Ifamax prides itself on having a team of advisers below the age of 40. This team includes Ashton Chritchlow, Jamie Jacobs, Gethin Richards, and Kattrina Strothmann, providing reassurance that clients will have continuous and sustainable financial guidance throughout their retirement years. 

Our senior advisers, Max and Richard, continue to look after legacy clients and also take a strategic role in the business alongside the younger team. Ifamax has a robust succession plan in place and our team under 40 have the capacity and experience to continue to take on new clients, whatever your financial needs may be.

Conclusion

Retirement planning is about securing a sustainable income and ensuring clients have a sustainable adviser. The current landscape of the financial advisory industry in the UK presents challenges, particularly with an ageing workforce and difficulties in attracting young talent. 

However, firms like Ifamax demonstrate that it is possible to prioritise sustainability and independence, ensuring clients have reliable and consistent financial advice as they navigate their retirement years.

For those considering their retirement plans, choosing a financial adviser who understands their economic needs and assures long-term support and continuity is essential. If you would like to speak with one of our team regarding retirement planning or wealth management, please contact us at 0117 33 22 626 to speak with one of our specialists.

The government's decision to abolish the Lifetime Allowance (LTA) on April 6th, 2024, is a significant change for pension savers. Here at Ifamax Wealth Management, we want to help you understand what this means for your retirement planning.

What was the Lifetime Allowance?

Previously, the LTA capped the amount you could accumulate in your pension pots before facing tax charges on withdrawals. If your pension exceeded the limit (set at £1,073,100 in 2023/24), any amount above suffered a penalty charge when withdrawn.

The LTA is Gone, But Allowances Remain

While the LTA is scrapped, it's replaced with three new allowances:

• Lump Sum Allowance (LSA): You can take 25% of your pension as a tax-free lump sum (Pension Commencement Lump Sum) upon reaching 55 (rising to 57 from 2028). This allowance is capped at £268,275 per person, across all your pension pots.

• Lump Sum and Death Benefit Allowance (LSDBA): This combined allowance totals £1,073,100 and covers both tax-free lump sums taken while alive and those paid out on death (if before age 75). Any death benefits exceeding this limit are taxed at the beneficiary's marginal income tax rate.

• Overseas Transfer Allowance (OTA): Set at £1,073,100, this allowance applies to transfers made to qualifying overseas pension schemes (QROPS).

Lifetime Allowance Protection

Some individuals may have "lifetime allowance protection," safeguarding their pension savings from past LTA reductions. This could mean a higher LSA or LSDBA if you had a significant pension pot at certain dates, and registered for protection with HMRC.

Increased Contribution Limits

Alongside the LTA abolition, the government raised the annual tax-free pension allowance to £60,000 or 100% of your salary (whichever is lower). The money purchase annual allowance (MPAA) for those already retired also increased to £10,000. These changes aim to encourage continued pension contributions.

Looking Ahead

With a UK general election now decided, there is always the chance our new government might reintroduce the LTA. Therefore, it might be wise to review your pension and pension planning sooner rather than later.

Speak to a Financial Advisor

The changes can seem complex. Ifamax Wealth Management is here to help. Our team of financial advisors can provide personalised guidance on navigating these changes and maximising your retirement savings. If you require wealth management services in Bristol, please contact our team of financial advisors.

Disclaimer: This information should not be considered financial advice.

In 2023, Bank of America analyst Michael Harnett began using the phrase “Magnificent 7” to describe the biggest seven stocks in the US (Apple, Microsoft, Alphabet, Amazon, NVIDIA, Tesla and Meta Platforms).

The returns in 2023 and 2024 were:

Source: CNN and Y Charts

FoMO

Fear of missing out (FoMO) is a unique term introduced in 2004 to describe behaviour observed on social networking sites. The first observation is the perception of missing out, followed by a compulsive behaviour to respond.

This applies as much to investing as to all aspects of our lives. However, FoMO can be a “dangerous” approach to investing:

Tulipmania—1630s: There is some debate about the truth around this. However, according to research by UCLA economics professor Earl A Thompson, the tulip bulb price soared twentyfold between November 1636 and February 1637 before plunging 99% by May 1637.

The Dot-com Bubble – 1990s: The NASDAQ Composite Index, home to most of the technology/dot-com stocks, rose from 750 at the start of 1990 to a peak of over 5,000 by October 2000. By October 2002, it had plunged 78%.

There are many other examples, and every bubble is different. Still, they carry the same behaviours: a desire to ignore cautionary signs, even to the end when the bubble bursts, and the damage this inevitability causes.

The Magnificent Seven

The table below shows the movement of the top ten developed global companies from 1980 to 2020:

To demonstrate how this has changed in 2024, and considering all global companies (including emerging economies):

Source: The Motley Fool (June 2024).

Even in the space of four years, the make-up has changed.

Risks of Chasing the Magnificent Seven

Nothing lasts forever; investing in the Magnificent Seven today doesn’t guarantee future returns.

There are also additional risks:

1. Overconcentration: One of the most significant risks is overconcentration on one sector and the economy. When these companies do well, as we can see, they do very well, but the converse does happen. Therefore, having a more diversified exposure will reduce that risk.

2. AI: There are parallels to the Dot-Com Bubble. If the reality of AI doesn’t meet the hype and regulation slows growth, then the momentum behind many of these stocks will fade.

The main message is that although the stories of outsized returns can lull us, the danger is to assume we can predict the future. History and evidence show that the top companies rarely stay at the top forever. Additionally, thinking we know the future and can predict the path of factors outside our control is a brave approach for any investor.

To conclude, it may be worth reflecting on the exposure within the Ifamax portfolios. We do have some exposure, but this does not dominate the holdings. This ensures that the portfolios benefit from some of the performance but are protected should this reverse.

General disclaimer: The data has been sourced from external sources. Although we have looked to ensure this is as accurate as possible, we are not responsible. The blog is written personally and reflects the author's view; it does not necessarily reflect the opinions of Ifamax Wealth Management. Individuals wishing to buy any product or service because of this blog must seek advice or conduct their research before making any decision. The author will not be liable for decisions made because of this blog (particularly where no advice has been sought). Investors should note that past performance does not guide future performance, and investments can fall and rise.

Globally, the most significant upcoming election is in the US, but of course, the UK election is also expected towards the end of this year.

There are similarities to US and UK politics in that it is generally a race between two parties, as the charts below show:

There appears to be greater party loyalty in the US despite how voters may feel about the leader. In all elections, the person who wins is often decided by a minority of people, the swing voters. Between 1952 and 1980, this was 12% of the electorate, and now it is thought to be around 3%.

In the UK, “swing voters” tend to revolve around age groups, and therefore, where US elections tend to be very tight, UK elections can see large majorities. Thatcher (1983 – 144 majority), Blair (1997 – 178 majority) and Johnson (2019 – 81 majority).

The question is, from a stock market perspective, does it matter who wins an election?

US Data

Two separate pieces of data indicate that annual US growth is better under a Democratic President.

The Economic Policy Institute (EPI) is a respected non-profit, non-partisan think tank. Due to its work, which is aimed at low—and middle-income families, some view it as more left-leaning.

The second piece of research is from the Joint Economic Committee, which is responsible for reporting the current economic condition of the United States and for making suggestions for improvement to the economy. This also indicates that growth is stronger under a Democratic President:

According to CNN data, the US stock market has performed better under the Democrats since 1945.

However, there isn't much difference if you consider data over a more extended period. Deutsche Bank provided this chart.

The key takeaway is that the data seems to suggest that the Democratic Party are better for the economy and markets. However, as we can see in the chart above, the actual returns have been broadly similar in recent years.

UK Data

Similar research is complicated to ascertain in the UK. However, this data from the Office for National Statistics from 1955 (Q1) to 2019 (Q2) shows annualised Gross Domestic Product (GDP).  The theory is that the higher the rate, the more the economy will grow. This slightly favours a Conservative Government.

The chart below is more relevant as it shows stock market returns.

However, this is hard to Judge as Labour from 1997 saw five financial shocks (Asian Financial Crisis, Russian Financial Crisis, Dot-com bubble bursts, September 11, and Global Financial Crisis) compared to the Conservatives from 2010 (Brexit referendum, Covid Pandemic, and Inflation).

To conclude

We cannot predict the outcome of the elections or what any new Government may or may not do. Evidence indicates that whichever party comes to power in the US and the UK makes little difference to long term stock market performance.

Stock markets and currency markets can be volatile before and after an election, but over the long term, they will adapt to the regime in power and the state of the economy. Events outside the government's control are often more likely to impact markets.

There are perhaps three things to consider irrespective of the elections:

1. Equity valuations globally (excluding the US) remain at or below their long-term averages, meaning there are long-term opportunities for returns within diversified portfolios.

2. The Inheritance Tax Band was set at £325,000 in 2009/10; this hasn’t changed at a time when house prices and other assets have.

3. Allowances for capital gains and dividends have come down, meaning more investors are paying taxes.

In conclusion, we will not position (or reposition) our investment strategy based on any upcoming elections. We maintain our long-term strategies and adapt to any new legislation and tax allowances.

General disclaimer: The data has been sourced from external sources. Although we have looked to ensure this is as accurate as possible, we are not responsible. The blog is written personally and reflects the author's view; it does not necessarily reflect the opinions of Ifamax Wealth Management. Individuals wishing to buy any product or service because of this blog must seek advice or conduct their research before making any decision. The author will not be liable for decisions made because of this blog (particularly where no advice has been sought). Investors should note that past performance does not guide future performance, and investments can fall and rise.

As our world becomes more interconnected, financial fraud has become a means of exploiting our vulnerabilities. The statistics paint a stark picture: in 2022, £1.2 billion was stolen, with a further £1.2 billion stopped by the banks (source: UK Finance).

However, these figures only scratch the surface of the threat faced by millions. An article from the National Trading Standards indicated that some form of financial fraud had targeted 40 million people in the UK in 2022.

The impact of financial fraud can be devasting, but the chart below from gov.uk shows that 36% of fraud incidents lead to no monetary loss.

The most significant number of losses come from the higher values. The challenge in getting back money is whether the individual has authorised the payment. As the table below shows, there is a switch towards authorised payments, which makes it hard to get any money back.

Using people, we know can create confusion:

The image below from NatWest shows how Scammers use Celebrities to encourage people to part with their money.

But it is not just celebrities. Our own Jamie has become the “face” of a WhatsApp contact for a company called gainvalley.com, which is a trading platform. Of course, he has no connection with the firm, and there is very little that he can do to stop this.

We have heard numerous stories of other adviser firms being contacted by “the client” using the client's “email”, requesting a significant sum of money. The scammers had cloned their email, and fortunately, a red flag was that the client said they had changed their bank account.

What to do

The scammers are becoming more sophisticated. Below are some helpful tips from the FCA website as to what might be a scam

The FCA has a fantastic website called Scam Smart, which offers handy insights: https://www.fca.org.uk/scamsmart.

If you are unsure of something you have received, please do contact us, and we will look at it.

Reaching retirement is a significant milestone, but navigating the world of pensions and taxes can be tricky. Fortunately, there are strategies that can help you keep more of your hard-earned money for what matters most; enjoying your retirement. Here are some of the key considerations:

Understanding your allowances:

• Personal allowance: This is the amount you can earn each year before paying income tax. In the 2023/24 tax year, it's £12,570. By keeping your income below this threshold, you'll pay no income tax on your pension income.

• Savings allowance: Earn up to £1,000 in interest from savings accounts without paying tax. This includes interest from ISAs, so consider maximising ISA contributions.

Maintaining tax-efficient savings:

• ISAs (Individual Savings Accounts): These offer tax-free growth and income, making them ideal for retirement savings. Contribute the maximum amount you can afford each year to benefit from this tax advantage.

• General Investment Accounts (GIAs): While not completely tax-free, capital gains on investments held in GIAs are typically exempt from tax if generated within the current annual allowance of £6,000.

Withdrawing from your pension tactically:

• Tax-free lump sum: You can usually take up to 25% of your pension as a tax-free lump sum. However, taking too large an income from the taxable part of your pension could push you into a higher tax bracket, so plan strategically.

• Phased withdrawals: Consider taking smaller pension withdrawals instead of a large lump sum to stay within your personal allowance and minimise your tax bill.

Deferring your state pension:

• Delaying your state pension can lead to a higher income in later years. This option might be suitable if you have other sources of income or want to bridge the gap to a higher state pension age.

Distributing of assets:

• If you're married or in a civil partnership, transferring some of your assets to your partner could help them benefit from their own personal allowance, potentially reducing your overall tax burden.

Disclaimer:

This blog post is for general information purposes only and does not constitute financial advice. It's crucial to seek professional financial advice tailored to your specific circumstances before making any decisions regarding your retirement income and tax planning.

Remember, tax rules and allowances can change, so staying up-to-date with the latest information is essential. By understanding these strategies and seeking professional guidance, you can approach your retirement with confidence, knowing you're maximising your income and minimising your tax burden.

Take Control of Your Financial Future. Get in touch for your free initial consultation today.

After a year of financial volatility in 2023 - What can we expect from investing in 2024?

In 2023 UK investors navigated the choppy waters of market volatility fueled by geopolitical tensions, soaring inflation, and tightening monetary policy, and with this comes the inevitable question: what can we expect from investing in 2024? 

While it's always impossible to say for sure what the future holds, there are a few trends that we think are worth considering. Despite the financial fluctuations, investing still remains one of the best ways to make your money work for you, potentially creating future financial freedom and outpacing the eroding effects of inflation.

1. Continued market volatility

The past few years have been marked by significant market volatility, and it's likely that this trend will continue in 2024. This is due to a number of factors, including the ongoing financial effects of the COVID-19 pandemic, the wars in Ukraine and Gaza, and rising interest rates. As a result, investors should be prepared for a bumpy ride and should avoid making any rash decisions without the guidance of a wealth management expert.

There are grim predictions such as slow growth and the risk of recession to contend with, but as always where there is a problem, there is also opportunity. 

2. The importance of ESG investing

Environmental, social, and governance (ESG) investing is becoming increasingly popular. ESG investors consider the environmental, social, and governance impact of a company before investing in it. ESG investing can be a good way to align your investments with your values and can also lead to better long-term returns. ESG is not a trend that is likely to dissipate any time soon; it's a fundamental shift in how we view the role of businesses in society, driven by powerful forces like the growing importance of sustainability, evolving investor demands, and stricter regulations.

With regulatory pushes to standardise reporting it will make it easier for investors to evaluate and assess businesses for potential investment

3. The need for professional advice

Investing can be complex. Because of the wealth of unqualified resources and information available, it's always a good idea to seek professional advice from a qualified financial advisor. A financial or wealth management advisor can help you create an investment plan that meets your individual needs and goals.

It's important to remember that there is no crystal ball, and no one can predict the future with certainty. However, by being aware of the trends that are shaping the market, we can help you make informed investment decisions and increase your chances of success.

Over the longer term, investors expect a positive, after inflation return from investing in company shares and lending money to governments and companies by owning bonds. Unfortunately – and inescapably – in the shorter-term market returns are anything but predictable. They contain a lot of noise, as the market absorbs new information into prices. High inflation in 2022 led to a rapid rise in interest rates around the world, contributing, in part, to the fall in global bond and equity prices.

It was a painful backward step and a reminder that the road to long-term returns can be bumpy and painful at times. With these now higher yields, some investors may have been tempted to hold more cash but roll forward a year and that would have been a poor decision in the short term. It is nearly always a bad decision in the long term for those with long investment horizons. Fortunately, 2023 has delivered a much more positive story.

Looking backwards

Last year all core assets delivered positive returns. The US market – and in particular the ‘Magnificent Seven’ as the press have dubbed the big tech firms – regained the losses they suffered in 2022. In fact, they contributed around three quarters of the return of the US market over the year. As a consequence, global developed market returns were very strong, given that the US weight in global markets is around 63%.

Value companies underperformed in the US (largely because of the overwhelming impact of the ‘Magnificent Seven’) but made a strong contribution outside the US. Both value and smaller companies outperformed strongly in emerging markets. Global commercial property (REITs) also managed a positive return.

On the defensive side of portfolios, high quality, short-dated bonds have recouped over half of the falls suffered in 2022 - largely on account of the higher bond yields, which caused the pain in 2022 - delivering returns similar to cash.

Figure 1: Global investment returns – 2022 and 2023 compared

Data: Funds used to represent asset classes, in GBP. Details available on request.

Sensible, systematic portfolios comprising a diversified ‘growth’ basket of equities – with tilts to value and smaller companies - paired with ‘defensive’ short dated high-quality bonds will have delivered robust returns in 2023, somewhere in the region of 9% for a 60/40 split respectively in GBP terms. 

Investors with portfolios denominated in GBP suffered a small currency drag over the year as Sterling appreciated against the US Dollar by around 4%, as well as most other major currencies.  Year-on-year inflation in the UK fell to 3.9% in November, down from 10.5% at the start of the year. 

Looking at three-year cumulative returns helps to illustrate the benefit of remaining invested through tough years such as 2022. Bond returns have been poor due to starting yields around 0% at the start of the period followed by subsequent yield rises (and thus bond price falls), but these were more than compensated for by strong growth asset returns.

Figure 2: Cumulative global investment returns – three years to the end of 2023

Data: Funds used to represent asset classes, in GBP. Details available on request.

Looking forwards

The outlook for the global economy looks a little bleak as major economies teeter on the brink of recession, including the UK. China has deep and wide economic problems that are restraining its growth prospects. Inflation has come down in the EU (2.4%), US (3.1%) and UK (3.9%) from recent double digit highs.

Risks remain – including conflict in the Middle East impacting energy and supply chains –and the final yards to reach central bank target levels of inflation (2% in the UK) will be harder to achieve and vulnerable to geopolitical risks. Interest rates may well remain elevated relative to the low rates that investors experienced up until early 2022, which is good for bond holders.

It is useful to remember that forward-looking views are already reflected in today’s prices. What comes next, no-one truly knows. The key is to remain highly diversified, resolute in the face of any market set-backs and focused on long-term goals.

And finally…

More broadly, Putin continues to wage his illegal and brutal war in Ukraine and the terrible humanitarian tragedy unfolding in Gaza seems to have no resolution in sight. Our thoughts are with all the innocent people caught up in these conflicts.

This year we face the prospect of elections in democracies such as the UK, US, Taiwan, India, Pakistan, Indonesia, and within the European Union. US politics is as deeply partisan as it has ever been, raising the level of uncertainty about the future. The democratic process is always combative, often messy and sometimes ugly.

On a brighter note, it is worth remembering that despite the conflicts in the world, seeming discourse in democratic nations and the rise of autocratic and despotic leaders, the world we live in is better in many respects than ever before. While 659 million of the world's population live in poverty, this is down from 1.9 billion in 1990 and 902 million in 2012 (1).

Global under-5 mortality has dropped by 60%, 2.1 billion people have gained access to safe drinking water since 2000 and today 40% of board seats in FTSE 350 companies are held by women (10 years ago 150 or so of these companies had no women on their boards) (2). These lesser known facts are a strongly positive counterbalance to the immediate troubles that the world faces.

From an investing perspective, we remain hopeful for the best in 2024 but remain prepared for the worst, as is always prudent.

Happy New Year!

(1)https://borgenproject.org/victories-fighting-poverty/ 
(2) Sunday Times magazine, December 31, 2023. ‘Really, actually, properly excellent things that happened in 2023’