Nights are drawing in

As autumn brings a return to shorter, chillier days, the instinct for shoring up for the winter affects not just wildlife but the rest of us. The costs of living challenges have barely abated, with inflation and interest rates still high. The mixed factors behind the unexpected slight drop in the rate of inflation for August was a more positive note to end the summer.

Another brighter aspect after a two-year hiatus has been some opportunity growth for savers as banks pass on higher interest rates – over 5% for the first time in more than 15 years. Beyond savings, however, those seeking income from their investments have also found new options. Another major benchmark radiating good news in the investment sector Just two years ago the prospective return on the 10-year UK government bond (gilt), for example, was only 0.57%, but in September 2023 that return rate is now more than eight times higher. Of course, inflation still means that the actual value in your account may not be able to recover the value eroded over the past couple of years, but the momentum is currently in a better direction.

For those approaching retirement, a recent report from Scottish Widows may prove unsettling, highlighting that a third of people may be heading towards retirement plans they cannot afford. The Pensions and Lifetime Savings Association have created three standards of retirement that reflect retirement aspirations in the twenty-first century. The report found that even the minimum retirement standard looks to be out of reach for many at their current savings rate and relying on the State pension. The budget allocated for each standard doesn’t include housing costs which are becoming an additional expense for many into retirement. Reviewing your plans, hopes and funding on a regular basis should help bridge any gaps.

At the other end of the journey, students in England face changes this year to the way their university education is funded. The student loan scheme Plan 5 has changed with the government’s aim that more graduates than ever pay back their loans in full over the course of their lives. The payment term has increased from 30 to 40 years, and the income threshold lowered to £25,000. Estimates indicate that the number of students repaying loans in full should double from approximately one quarter to around half. The loan schemes for Scotland and Wales have not yet followed suit.

For updates on these and other issues that could affect your financial planning, please see our autumn newsletter. We will continue to monitor the effects of inflation, and other outcomes during the financial year, so our next newsletter will bring you the latest on managing your financial future.