When a 1920s ad referred to compound interest as “the eighth wonder of the world”, the quote was left unattributed. But that didn’t stop it from becoming synonymous with the celebrated physicist, Albert Einstein.
The link was likely intended to lend credibility to a statement that at first glance seems bold. And yet, compounding could be key to the success of your long-term financial plans.
As Einstein did or didn’t say, “He who understands it, earns it, he who doesn’t, pays it.” Whoever did say this, knew what they were talking about.
The compounding effect – essentially growth on growth that snowballs over time – can have an enormous impact on your finances. It can significantly increase the size of your savings and investments in the long term but, if not carefully managed and understood, it can also work against you.
This handy guide clearly explains how compounding works, and provides examples of how it might boost or harm your financial circumstances.
Download your copy here: “The compounding effect: How it could boost or harm your finances” to find out why compounding may be an essential part of your long-term financial plan.
Please get in touch if you’d like to speak to one of our team about how we could work with you.
Please note: This guide is for general information only and does not constitute advice. The information is aimed at retail clients only.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested.
Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
The Financial Conduct Authority does not regulate cashflow planning.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Creating a financial plan can seem complicated, especially if you need to take into account your partner’s views, assets, and goals. At times, you might have conflicting ideas about what is “right” and it can be a difficult situation to navigate.
Working with a financial planner as a couple could help you overcome some of the key challenges you might encounter when building a financial plan with a partner.
Talking about money is sometimes seen as a taboo subject. So much so that even talking to your partner about shared finances can feel awkward.
Indeed, according to a March 2024 survey from Aqua, just 24% of Brits discuss finances with their partner frequently. In fact, far more (39%) admitted they don’t talk about money with their partner regularly.
From discussing everyday spending to investing for your future, it’s important to be on the same page, and that’s impossible if you’re not talking about money.
Having a regular meeting as a couple with a financial planner gives you dedicated time to talk about money and get those important conversations started – you might find they come more naturally over time.
Even if you’re working towards the same overall goal, there might be times when you and your partner have different priorities.
Perhaps you want to put extra money into your pensions so you can retire early, but your partner would rather focus on building a nest egg for your children. Balancing these competing priorities can be challenging and lead to arguments, even though managing your finances well is important to both of you.
A financial plan that’s tailored to you can help you understand the effect of your decisions so you can balance different priorities.
For example, in the above instance, you might calculate if you could still reach your retirement goals if you delayed increasing pension contributions for five years. The outcome may mean you feel more comfortable adding contributions to your child’s savings, knowing that your long-term future is still on track.
Please note that a pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
Conflicting views on how to use money and spending habits are a major cause of arguments in relationships.
Indeed, an Independent report from March 2025 suggests that 30% of people in relationships are worried that discussing savings or investments will cause arguments. Working with a financial planner could minimise conflicts and ensure you’re both on the same page.
Having a shared goal could reduce conflicting spending habits. Imagine you’re in a relationship where one of you is a “spender” and the other a “saver”.
Having a defined amount that needs to be added to savings or investments each month to reach a defined goal may mean the spender is less likely to overspend. Similarly, the saver may feel more comfortable spending disposable income if they know long-term goals are on track.
Sometimes your financial planner acting as a neutral third party can be useful when you’re discussing differing money habits too. They may be able to highlight where a compromise could be made or demonstrate why one option better supports your lifestyle goals.
The good news is that when you’re working together, you could get more out of your money.
Understanding how assets may be used to reach your goals can be complicated and when you’re planning with a partner, bringing them together may be a challenge.
For example, you may both be paying into a pension – what income could each provide and is it enough to deliver the lifestyle you want? Should you have individual savings accounts or combine them?
A financial plan can help you get to grips with your assets, understand your options, and make decisions based on your goals.
Equally, many tax allowances and reliefs are individual. So, you might need to consider how to use both your ISA allowance, pension Annual Allowance and more in a way that reflects your circumstances and provides both of you with financial security.
A plan that’s tailored to you and your partner could help both of you feel more confident about the future and ensure you are working towards goals together.
Please get in touch to talk to us about your aspirations and build a financial plan.
This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
When you’re creating an estate plan, there are a lot of areas you might need to include, from considering tax liability to naming your beneficiaries. It’s an important part of your financial plan and, if you want to protect or provide for younger family members, there might be some additional steps to take.
In simple terms, estate planning means setting out how you’d like your assets to be managed later in life and when you pass away.
While thinking about death can be uncomfortable, estate planning is a way to ensure decisions align with your wishes.
If you have young family members that you want to include in your estate plan, whether they’re your child, grandchild, or other relative, here are some steps that might be essential.
If you’re a parent or guardian of a child, considering who would be responsible for their care if you pass away is important.
Usually, if one parent passes away before the child is 18, the surviving parent will take parental responsibility, regardless of any guardianship appointment.
When there is no surviving parent or valid will, the court will typically appoint a guardian. Even if you’ve informally agreed with family or friends who will care for the child if you die, the court will make the decision. As a result, the outcome might not align with your wishes and may not be what you believe is best for the child.
Despite this, 2023 data from The Association of Lifetime Lawyers suggests it’s something many parents have overlooked. Indeed, 70% of UK parents had not named a legal guardian to care for their children in the event of their death.
So, using your will to name a guardian for your child is an important step.
You can choose to appoint a guardian, subject to conditions being met. For example, you might appoint the child’s grandparents as guardians, provided they are below a certain age and, if not, name a substitute.
A child can be a beneficiary of your estate. However, by law, they’re deemed to not have the capacity to receive any money or assets.
Usually, the inheritance you leave to a child will be kept “in trust” until they turn 18. This can be done after your death, but it may be valuable to set up a trust now or use a “letter of wishes” alongside your will to outline how you’d like the assets to be managed on the beneficiary’s behalf.
A trust is an arrangement that names a trustee to manage or distribute the assets in the trust on behalf of the beneficiary.
One of the benefits of a trust is that you can set out under what circumstances the assets may be used, and they could provide both short- and long-term financial security for a child.
For example, you might state that while the beneficiary is under 18, the trustee may use the assets to pay for education or day-to-day costs.
Alternatively, rather than explaining how you want the assets to be used, you might allow the trustee to make decisions that they believe are right for the beneficiary. So, if you want to leave assets to your grandchild, the trustee could be their parent and you allow them to use the assets how they wish.
The assets held in a trust don’t have to be given to the child when they turn 18; you can set out when, if ever, this happens. Instead, you might state they can take an annual income from the trust but may not sell the assets, or that a trustee will continue to make decisions until they’re 25.
It’s often sensible to seek professional legal advice when you’re setting up a trust, as they can be complex, especially if you have clear wishes about how and when the assets should be used.
A financial review could also be useful and help you decide which assets to place in the trust. It can be difficult or, in some cases, impossible to remove assets once you’ve transferred them.
Please get in touch if you’d like to speak to one of our team about your estate plan and the steps you might take to protect young family members. It could offer you peace of mind that your loved ones will be secure should the worst happen.
This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
The Financial Conduct Authority does not regulate estate planning, trusts, or will writing.
If you want to help younger generations, passing on this pearl of wisdom could be key – start saving for your future as soon as possible.
Many people think about their legacy when setting out their long-term goals. You may have considered gifting during your lifetime or how you’d like assets to be distributed after you pass away. One area you might have overlooked is the positive effect your financial insights could have.
Your knowledge could have a huge effect on the long-term finances of your loved ones.
Indeed, a February 2025 survey from Aegon asked over-50s what they would tell their younger selves if they could time travel. Almost half of respondents said to “start saving as early as possible”.
In fact, the money tip ranked higher than “take care of your health”, “find a job you love”, and “spend more time with family”.
A wealth transfer could give your loved ones a helping hand, but knowledge might be just as important.
When asked about the lifestyle choices they regret, the survey suggests many over-50s wish they’d considered long-term finances earlier.
Respondents said they wish they knew more about how to invest and grow wealth (22%) and retirement planning (17%) at a younger age.
Research from Aviva published in March 2025 found a similar sentiment. Over-50s said they would tell their younger selves to:
In addition, respondents said they’d encourage their younger selves to spend less on material items, like cars or designer labels. Instead, they’d prioritise experiences, including travelling the world, and creating a financial safety net.
It’s not surprising that younger people are less likely to consider the long-term implications of their financial decisions. After all, it can seem like there’s plenty of time to think about retirement or other milestones.
So, passing on what you’ve learnt about managing finances could be valuable. As well as sharing regrets, it’s a great opportunity to talk to your loved ones about the actions that have had a positive effect on your lifestyle, too. That might be putting a small amount of your income into savings each month, investing, or overpaying your mortgage.
1. It could help them form positive money habits
Even if they don’t have financial goals right now, establishing positive money habits, such as setting out a budget, regularly contributing to a savings pot, or minimising debt, could lead to your loved ones laying a strong financial foundation.
2. It’s impossible to know what’s around the corner
Young people might be more likely to adopt a mindset of “it won’t happen to me”. It could mean they’re less compelled to put money aside for unexpected life events that could derail finances.
Yet, financial shocks, like losing your job or being diagnosed with an illness, could affect you at any life stage. So, encouraging your loved ones to start saving as soon as they can could enable them to create a robust financial safety net.
3. They could benefit from the compounding effect
Compounding is a powerful way to boost savings over time. Money placed in the bank will earn interest and, if it’s left untouched, the interest added will rise each time it’s calculated.
Imagine you place £1,000 in a savings account with a 5% annual interest rate. If you leave the interest earned in the account, your money would grow by:
By year 10, the total amount in your savings account would be £1,628.
The compounding effect may also apply to investing, including through an ISA or pension.
So, by starting as soon as possible, your family could benefit from years, or even decades, of the compounding effect.
Remember, the above figures are for illustration purposes only. Returns aren’t guaranteed and are unlikely to be consistent each year.
4. It could help them think about their life goals
Putting money to one side for the future could trigger your loved ones to consider what they want to achieve, from raising a family to starting a business.
Setting a direction might enable them to make better financial decisions that support their goals.
If one of your goals is to support your loved ones, incorporating them into your financial plan may be useful. You might want to consider how gifts during your lifetime may help them reach their aspirations or create an estate plan that reflects this.
In addition, we could also work with your family members to build a tailored financial plan for them, which could help them balance short-term needs and long-term financial security.
Please get in touch to arrange a meeting with our team.
This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
2025 has already been eventful for investors. Many factors are influencing market volatility, and one cause you might have overlooked is the emotions of investors. Read on to find out why fear and anxiety might lead to the value of investments falling.
US president Donald Trump entered the White House for a second term in January. Since then, his policies have caused global uncertainty, particularly the introduction of tariffs on goods imported into the US.
Indeed, Forbes reported in April 2025 that during the first 90 days of the new administration, the S&P 500 (an index of 500 leading companies) had tumbled 15% from its peak. The Nasdaq, a technology-focused index, had fallen 20%.
It’s not just US markets that have been affected. Markets around the world have experienced volatility.
While the overall trend has been a downward one, there have been points where the market has picked up.
For example, on 10 April, Trump paused his tariffs against most nations except China. The Guardian reported markets surged following the news – the S&P 500 was up 5.6% and the Nasdaq jumped more than 8% – as investors hoped there would be a renewed focus on trade deals.
So, over the last few months, investors have experienced larger swings in the value of their investments than they might usually.
It’s easy to look at the news and think that volatility is something that happens to investors. Yet, how investors react to news drives volatility, too.
Emotional investment decisions may result in market declines
At times, investor emotions, like fear and anxiety, may play a major role in market volatility.
When investors are worried, they’re more likely to react based on emotions, even if they usually make logical decisions. Listening to the news about geopolitical tensions could spark large numbers of investors to sell their assets because they’re worried the value could fall.
If enough investors panic sell, it can lead to a downturn that creates yet more uncertainty, which, in turn, might lead to the value of assets falling even further. So, sometimes, short-term market swings are due to investor fear, rather than economic data.
It’s not just negative news that might lead to investors making knee-jerk decisions either.
If the government indicated it might make an investment in Artificial Intelligence (AI), you could see technology stocks benefit from a rise due to excitement about the potential boost, even if the investment doesn’t materialise.
Data from interactive investor highlights how announcements might prompt investors to act.
On 7 April, Trump announced so-called reciprocal tariffs on many nations. This led to market volatility and a record number of people buying and selling assets through the investment platform. In fact, trading volumes were 36% higher than the former record, which was set just a week earlier during a similar period of volatility.
While some of these investors may have made decisions based on worries about the future, others might have been excited at the prospect of being able to buy when the market is low. These decisions made by individual investors will have played a small role in the volatility the market experienced.
While investment returns cannot be guaranteed, reviewing the historical data suggests markets deliver a return over a long-term time frame. Remembering this during periods of volatility could help ease your nerves.
Here are three quick tips that might enable you to keep your emotions in check when investing.
If you have any questions about what the current market volatility means for your investments and financial plan, please get in touch. We’re here to help you tune out emotions like fear and focus on how to achieve your long-term goals.
This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
Financial protection could provide you with a cash boost when you need it most, and there’s more than one type to consider.
Last month, you read why financial protection provides a crucial safety net should you face an unexpected shock. Now, read on to find out more about some of the key options.
Your income suddenly stopping is likely to have an immediate effect on your short-term finances. In addition, it may harm your long-term plans too. For example, you might halt pension contributions or dip into a savings account you’d earmarked for another goal.
If an illness or accident means you can’t work, two types of financial protection could be valuable.
1. Income protection
Income protection would pay you a regular income if you were unable to work due to an accident or illness. The income it provides would continue until you return to work, retire, or the term ends.
So, if you can’t work, it could take a weight off your mind and allow you to focus on recovering.
Usually, income protection would pay a proportion of your usual salary, such as 60%. According to figures published in September 2024 by the Association of British Insurers (ABI), in 2023, more than £177 million was claimed through individual income protection. The average successful claimant received £22,270.
2. Critical illness cover
Critical illness cover would pay out a lump sum if you’re diagnosed with a covered critical illness. This cash injection might allow you to take an extended period off work while remaining financially secure.
The ABI figures show the average person who made a successful critical illness claim in 2023 benefited from a £68,354 lump sum.
You should note that critical illness cover will not pay out for every diagnosis. It’s important to check how comprehensive your cover would be and understand what would be excluded.
You can combine types of financial protection
As income protection and critical illness cover pay out in different circumstances, it may be beneficial to consider whether both options could be right for you.
Thinking about passing away is difficult, especially if you have dependants. Yet, taking steps to ensure their financial security could make a huge difference in their life should the worst happen.
Here are two types of protection that could improve the financial security of your family.
1. Life insurance
Life insurance would pay out a lump sum to your beneficiaries if you pass away during the term. The money can be used however your beneficiary chooses, such as reducing debt, paying school fees, or covering household bills.
However, according to a Which? report, 39% of parents don’t have life insurance. This oversight could potentially leave your family in a vulnerable position if they rely on your income.
When assessing whether life insurance could be appropriate for your family, you might want to consider how their lifestyle would change if you passed away. For example, if you’re the primary caregiver to young children, would your partner need to reduce their working hours? If so, life insurance may enable them to do so without worrying about money.
On average, ABI figures show life insurance paid out £80,403 in 2023.
2. Family income benefit
If your loved ones may struggle to manage a lump sum or they would prefer a regular income they can rely on, family income benefit might be more suited to your needs.
Rather than a one-off payment, family income benefit would pay out a regular amount for a defined period if you passed away during the term. You might choose for the income to continue for a set number of years or tie it to a milestone, such as when your youngest child turns 18.
You can take out both life insurance and family income benefit
Again, depending on your family’s circumstances, you might choose to take out both life insurance and family income benefit. This combination could provide your loved ones with an immediate cash injection and a long-term income stream.
For instance, you may choose to take out life insurance to pay off debts, such as your mortgage. Then, family income benefit could provide enough to pay for day-to-day expenses until your children reach adulthood.
As part of a wider financial plan, we could help you create a financial safety net that considers your needs and concerns. Please get in touch to arrange a meeting with our team.
Next month, discover what you might consider when calculating the level of cover you need when taking out appropriate financial protection.
This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
Note that financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.
Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.
Once again, US president Donald Trump’s trade tariffs have affected investment markets throughout April 2025 and could have far-reaching implications over the coming months.
Indeed, UN Trade and Development now predicts that global growth will slow to 2.3% in 2025, compared to 2.8% last year.
While experiencing volatility can be daunting as an investor, remember to take a long-term view. Historically, markets have recovered from periods of downturn. However, it’s important to note that investment returns cannot be guaranteed.
Since Trump took office in January, uncertainty around trade policies has affected global markets, and these announcements continued to have an effect in April.
On 2 April, markets prepared for key tariff announcements from the US, dubbed “Liberation Day” by the White House.
The speculation led to a European stock sell-off gathering pace, with pharmaceutical shares being particularly affected. The Stoxx 600 healthcare index, which is composed of European businesses in the healthcare sector, fell by around 2.5%.
On “Liberation Day”, Trump announced sweeping two-tier tariffs. A baseline 10% tariff was applied universally to imports from all countries (except Mexico and Canada) and then additional country-specific “reciprocal” tariffs were also applied.
As a result, on 3 April, markets around the world plummeted when they opened – from Tokyo’s Nikkei (-3.4%) to London’s FTSE 100 (-1.4%). In fact, Wall Street recorded its worst day since 2020 as the S&P 500, which tracks 500 leading companies in the US, closed 4.9% lower.
On 4 April, Beijing retaliated and announced 34% tariffs on the US.
As the market continued to fall, it didn’t stop there, with both the US and China increasing their tariffs several times. By 11 April, China’s tariff had reached 125% and the US’s was 145%.
Amid this tit-for-tat trade war, Trump announced a 90-day pause on reciprocal tariffs for most countries, which led to markets rallying.
Despite the uncertainty experienced throughout April, the market began to settle towards the end of the month. On 24 April, the FTSE 100 closed 0.65% higher than it opened and was back to the level it was on 3 April before the tariff volatility. It was a similarly positive day for the main indices in Germany and France.
Headline data was mixed for the UK in April.
Figures from the Office for National Statistics show the economy unexpectedly grew by 0.5% in February. While this will certainly be welcome news for chancellor Rachel Reeves, experts predict a downturn in March due to the tariffs.
Inflation also fell in line with expectations to 2.6% in the 12 months to March 2025, compared to 2.8% a month earlier. The Bank of England hinted it could cut the base interest rate at the next Monetary Policy Committee meeting, and did so in May 2025.
However, readings from S&P Global’s Purchasing Managers Index (PMI), which provides an insight into the health of businesses, aren’t optimistic.
The PMI indicated manufacturing production fell at a faster pace in March as new orders declined at the sharpest rate in 19 months.
In addition, the private sector went into decline for the first time since October 2023 due to exports falling at the fastest pace in almost five years.
Eurostat data shows inflation was down across the eurozone to 2.2% in the 12 months to March. There was a significant variance between countries, from France (0.9%) to Romania (5.1%).
The figures paved the way for the European Central Bank to make its seventh cut to interest rates in the last 12 months. The main interest rate fell from 2.5% to 2.25%.
PMI data was more positive for the eurozone than the UK.
Factory output increased for the third consecutive month and crossed the threshold that indicates growth for the first time in two years. This boost is linked to orders rising as businesses tried to beat incoming tariffs.
Perhaps unsurprisingly given market volatility, a survey from the ZEW Economic Research Institute found German investor morale plunged to the lowest level since the start of the war in Ukraine. The president of the institute pointed to the “erratic change in US trade policy” as a reason.
There could be difficult months ahead for the US. The International Monetary Fund increased the probability of a US recession occurring in 2025 from 25% to 37%.
Tariffs affected more than the markets too. Uncertainty around trade policy led to factory production stalling, according to S&P Global’s PMI. However, at 50.2, the reading remained just above the 50 mark that indicates growth.
Similarly, the PMI showed US business activity fell to a 16-month low.
Some of the largest businesses in the US have suffered a setback due to the tariffs.
On 3 April, Apple shares were down by 9%, wiping $300 billion (£225 billion) from the company’s value. The business relies on imports from Asia and is likely to face higher costs as a result.
Tesla’s quarterly sales also indicated challenges as they slumped 13% in the first three months of the year. The fall was linked to strong competition from rivals and owner Elon Musk’s involvement with Trump’s presidential campaign.
Exports from China climbed by 12.4% year-on-year in March – a five-month high. The jump was caused by factories rushing to get shipments out before tariffs took effect.
There was a blow to China when Fitch downgraded its credit rating from A+ to A. The organisation said the decision was made before tariffs were considered and is due to China’s rising debt and deteriorating public finances.
This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
Financial planning is all about helping you to reach your life goals. Ultimately, the objective is for your wealth to allow you to achieve all the things you want to do now and in the future.
That might be as simple as being able to relax and enjoy a comfortable retirement or helping your children through education or onto the property ladder. Alternatively, you may want to start a business, retire abroad, or leave a legacy to causes you care about.
When making a financial plan, you could be looking several decades ahead. During that time, a variety of unknowns could crop up, altering your ability to meet your goals.
Unfortunately, there’s no such thing as a crystal ball. However, when it comes to your finances, cashflow planning could help you visualise how your wealth may fluctuate as you progress through life, and reveal answers to a variety of “what if” questions.
Find out more in this insightful guide, which covers:
Download your copy here: ‘How financial planning could help you answer essential “what if?” questions’ to find out how cashflow planning could help you answer questions, ease worries, and give you confidence in the future.
Please get in touch if you’d like to speak to one of our team about how we could work with you.
Please note: This guide is for general information only and does not constitute advice. The information is aimed at retail clients only.
The Financial Conduct Authority does not regulate cashflow planning.
This guest blog was written by Chris Budd who wrote the original Financial Wellbeing Book, and also the Four Cornerstones of Financial Wellbeing. He founded the Institute for Financial Wellbeing and has written more than 100 episodes of the Financial Wellbeing Podcast.
Our approach to money can be a great enabler of wellbeing. It can help us to spend our time doing the things we want to do. However, it can also act as a barrier.
Money should be our servant, but it often acts as our master. Understanding this aspect of our relationship with money, and where it acts against our wellbeing, can allow us to create a financial plan that will help us to be happier, not just wealthier.
There has been a lot of research over the centuries – and religious and philosophical teaching over millennia – about the sources of wellbeing in life. Financial wellbeing is firstly about understanding some of what has been learnt over the centuries. It is then about applying those principles to our own lives, a process we might call “know thyself”.
In this piece, we will look at some of what we have learnt about how money can sometimes get in the way of our wellbeing.
The comparison theory of happiness suggests that if you compare yourself with your peers, then this will either make you happy or unhappy, depending on whether you are better or worse off than them.
This can have a significant impact on our self-regard. Research shows that comparing ourselves with someone worse off can increase self-regard. It also helps to appreciate what we do have as we see people less fortunate than ourselves.
However, comparing ourselves with someone wealthier than us reduces our self-regard. It can also drive spending that doesn’t add to our wellbeing, and slows down progress towards achieving our financial goals.
Society encourages us to compare upwards. We tend to present the very best of ourselves on social media, for example. When we compare upwards, we are often comparing ourselves with people who appear to be happier and more successful than perhaps they really are.
Your definition of success may be a significant factor in your wellbeing. We are surrounded by images of success, and they invariably involve money and fame.
To see success in such terms is not conducive to wellbeing. A materialistic, or extrinsic, purpose, such as owning expensive things, relies on the approval of others. Achieving such a goal will only bring wellbeing as long as it is being noticed.
If you have a purpose or objective that is meaningful to you – known as an “intrinsic purpose” – then achieving this will give fulfilment and wellbeing.
“Know thyself” is about understanding what makes you happy, and what success means for you. Having clarity over your future, and a financial plan to get you there, will make a significant contribution to your wellbeing.
We all have our own view of money. Think of the many phrases about money:
Many of these phrases contradict each other. What phrases come into your mind when you think about money? For example, is it: “I’m not very good with money”.
It is worth taking some time to understand your own money stories, and asking yourself whether they are leading to you making good decisions. Perhaps discuss this with your financial adviser.
As we travel down life’s stony road, it can be hard enough just concentrating on the day-to-day. Taking a step back to “know thyself” is often a luxury many of us cannot afford.
This is why the role of a financial adviser is so important. It gives us time and space to think about what a happy future might look like – and then to create a financial plan for how to get there.
This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
An incoming change to the way pensions will be taxed when they’re inherited might mean you’re rethinking how you use your pension. Before you dive into updating your retirement plan, it’s important to understand what the changes could mean for you and how to balance passing on wealth with your retirement aspirations.
During the Autumn Budget in October 2024, chancellor Rachel Reeves announced that from April 2027 unspent pensions are likely to be included in Inheritance Tax (IHT) calculations. The government predicts the move will affect around 8% of estates each year.
In 2025/26, if the value of your entire estate is below £325,000, no IHT will be due. This is known as the “nil-rate band”. In addition, if you leave your main home to direct descendants, you may also benefit from the residence nil-rate band, which is £175,000 in 2025/26. Both thresholds are frozen until April 2030.
Your estate covers all your assets, such as property, savings, and material items. Currently, pensions fall outside of your estate, but you may want to consider how the value might change once pensions are included ahead of the new rule in 2027. Reviewing your retirement and estate plan could help you identify ways to improve long-term tax efficiency.
According to a February 2025 survey from interactive investor, 54% of UK adults are already planning to adjust their retirement or estate plan in response to IHT changes.
If the inclusion of your pension in your estate could increase the amount of IHT due, you might decide to update your retirement plan. Here are three options you could consider.
1. Spend more in retirement
The IHT changes could provide an excellent opportunity to update your retirement plan and consider what’s possible. Spending more of your pension during your life may bring the value of your estate under IHT thresholds or reduce a potential bill.
In the interactive investor survey, 19% of respondents said they plan to withdraw more money from their pension and gifting it (more on this later). What’s more, 6% are thinking about retiring earlier than previously planned.
So, if you want to deplete your pension during your lifetime, rather than leaving it as an inheritance, what would you do? You might start to think about a once-in-a-lifetime trip or how an income boost could allow you to do more of the things you enjoy, whether that’s visiting the theatre, supporting good causes, or keeping active.
Of course, spending more often needs to be balanced with long-term sustainability. A financial plan could help you understand if increasing pension withdrawals in retirement may lead to you running out of money later in life.
One thing to keep in mind is how increasing pension withdrawals could increase your Income Tax liability in retirement.
Your pension withdrawals will be added to other sources of income when calculating your Income Tax bill. As a result, taking a higher income from your pension could unexpectedly push you into a higher tax bracket.
2. Use your pension to gift wealth to your loved ones
If you’d previously planned to leave your pension to loved ones as an inheritance, gifting during your lifetime could provide a solution. You might withdraw a regular income or a lump sum to pass on to your beneficiaries.
A gift during your lifetime could be more beneficial to your loved ones than an inheritance later in life. It may allow them to purchase their first home, get married, pay education fees, or simply improve their day-to-day finances.
When gifting wealth, you may need to consider the “seven-year rule”. If you pass on assets and die within seven years of the gift being given, the asset could be included in your estate for IHT purposes. So, gifting during your early years of retirement could make sense if your goal is to reduce a potential IHT bill.
Again, keep in mind that withdrawing lump sums from your pension might increase your Income Tax liability and that gifting could affect your long-term financial security.
3. Reduce your pension contributions
8% of participants in the interactive investor survey suggested they planned to cut pension contributions due to the IHT changes.
For some people, this might be the right decision. For example, if you’ve already built up enough pension wealth to support yourself throughout retirement and you’d like to divert your money to other assets you could pass on tax-efficiently. However, it’s important to carefully assess your options to prevent knee-jerk decisions.
While your unspent retirement savings could become liable for IHT when you pass away, pensions are often tax-efficient in other ways. For instance:
So, while your pension’s value may affect your estate’s IHT liability, maintaining, or even increasing, pension contributions could be tax-efficient when you look at them in the context of your wider financial plan.
If the incoming changes mean you’re unsure how to manage your pension or pass on wealth to loved ones, please get in touch. We can work with you to create or adjust a tailored financial plan that considers your circumstances and goals as well as regulation.
This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The Financial Conduct Authority does not regulate estate planning or Inheritance Tax
