Post-election checklist, pension contributions and dividends - here's our weekly heads-up on the financial stories that may have caught your clients' attention over the weekend …
Six steps to survive post-election financial uncertainty
Top ‘click-bait' from the Financial Times this weekend as this article brings together the thoughts of a number of its personal finance writers on how readers might "take back control" with some prudent financial planning as they seek to prepare themselves to navigate "potentially volatile times ahead".
The article notes the combination of a weak government and "a loudly ticking clock on the UK's Brexit negotiations will undoubtedly rattle investors" - not to mention the questions being raised over the future direction of tax and pensions policy, which are "unlikely to end well for the wealthy".
None of the six steps is unlikely to come as much of a surprise to advisers although, by and large, they do provide a useful checklist for clients at this uncertain time:
- Diversify your investment portfolio
- Max out your pension
- Plan for future tax rises
- Consider what will happen to interest rates
- Think about holding some gold
- Assess what the weak pound means for UK equities
British workers are missing out on ‘buy one get one free' pension offer
Any clients who saw this Guardian article ought to have been encouraged to double-check the maximum percentage of employee pension contributions their employer is willing to match. According to the piece, around 3.2 million Britons who work for larger employers are failing to take up an average of £650 each year.
The article picks out the example of Tesco, which operates a scheme where an employee's basic pension contribution is 4% of salary, matched by a 4% employer contribution. Employees are, however, able to opt to increase their contributions, which Tesco will then match up to a maximum of 7.5%.
Workers who are unaware of this option are effectively passing up ‘buy-one, get-one free' cash, argues The Guardian, adding: "Royal London estimates a 40-year-old on average earnings, who chooses to take full advantage of an additional 3% employer-matched contribution, would have an income in retirement nearly £3,500 a year higher than someone who only contributed at the minimum level.
"This could make the difference between an income of £19,050 without the extra contributions, and one of £22,500 for those who took up the full employer match."
Are your investments in the dividend dangerzone?
Depending on what type of Brexit divorce - hard or soft - the UK ends up agreeing with the European Union, warns this Telegraph article, pay-outs from FTSE 100 companies could potentially fall into a "dividend danger zone". Since multinational businesses often pay out dividends in dollars, investors have enjoyed an income boost as the pound fell in value against the greenback after the June 2016 referendum.
That could be about to change, however, the article warns. Describing currency movements as "the big wild card" in dividend pay-outs, Premier Asset Management income fund manager Chris White suggests sterling could rise as high as $1.40 in the event of a soft Brexit and drop as low as $1.10 following a hard Brexit.
"It is really out of investors' control, so you have to be guarded when talking about dividend growth," he says. "It depends on a combination of exchange rates and politics." White also warns against being drawn to the highest dividend-paying companies, adding: "If you just select stocks based on dividend yield you will have a disastrous portfolio."
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