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The market, the Treasury, and your moneyThursday 28th May 2020
Stay alert! We’re living in exceptional times and to paraphrase an old adage: the price of survival is eternal vigilance. Never more apt than in times such as these and applicable to so many aspects of life. We are sentinels for your savings and investments and with your help, we will endeavour to ensure that even in these most testing of markets, your money will continue to work hard for you.
Right now, what’s important is length of time in the markets, as opposed to timing the market. Investing, or remaining invested now will give your money the longest possible time in the market. Since we are still in the early stages of the tax year, there is also ample opportunity to take advantage of all your tax-free savings allowances, in particular, your ISA and pension savings.
In the tax year 2020/21, you can save up to £20,000 a year in an ISA and the allowance for a Junior ISA has increased to a very generous £9000. Admittedly it’s difficult to drum up enthusiasm for savings that currently earn so little – but actually that’s all the more reason to make sure you maximise every opportunity. Whether you have a lump sum or you prefer to drip-feed money into your investments on a regular basis, (capitalising on any volatility going forward) your money will benefit even more as the earlier you start the longer you can remain invested. With cash savings interest rates so low it is important to maximise any opportunities whilst always ensuring you have a good cash buffer in reserve for those unforeseen emergencies.
It’s a similar situation with your pension savings. You can currently save up to £40,000 into your pension each year. As you know, this money also benefits from tax relief at your marginal rate. However, as we have often, and even quite recently, warned, the government has long had pension tax relief in its sights. Given the increase in spending to support individuals and businesses through this health crisis, the Chancellor will be looking at ways to cover those Covid-19 costs.
Whilst there are a number of ways this could be done, including further austerity measures and tax rises, a pension grab could be seen as a fiscal no-brainer. So, use it in case you lose it!
It’s important to keep the faith with your savings and investments and not be swept up in short-term market noise. Without doubt these are challenging times, but Rouse Limited is here to support you. If you have any queries about your financial management, please do get in touch. We’re with you every step of the way.