Whether lockdown drained our finances or left us with a cash surplus we are not sure what to do with, we are all relieved that things are getting back to normal.
But after the deepest recession for 300 years, what exactly is normal?
At Continuum we are looking at what has changed, and why making the most of the recovery could mean reassessing your financial plans.
What does recovery mean?
The UK saw GDP fall almost 10% in 2020, as a result of coronavirus restrictions. The Organisation for Economic Co-operation and Development has said the UK was the hardest hit of the world’s major economies – but may now have the fastest (with the US) recovery.
We will not be going back to the way things were.
- Recovery has come too late for some big names, like Debenhams and Thomas Cook – but other sectors have been boosted. The digital economy has thrived, with Amazon deliveries serving every home, and supermarkets competing to do the same.
- It is not just businesses counting the cost of Covid. Furlough and financial support for businesses cost the exchequer £billions leaving a huge tax deficit. The government has had to borrow huge sums to support the economy – £299bn from April 2020 to 2021, the highest figure since records began in 1946, and another £53bn this year.
- Key to recovery is an historically low bank interest rate, making it easier for businesses to invest in themselves. Unfortunately, it makes things more difficult for people who need to rely on income from their savings, because that income may simply no longer be there.
- Low interest rates have another downside. They may be driving inflation. The very low rates available on mortgages may be one of the factors causing house price rises, while things are made worse by supply chains struggling to get back up to speed.
Why recovery means you must look at your finances again.
The changes that are part of the recovery impact your financial arrangements.
Cash savings have become an expensive luxury. A combination of inflation and low interest rates mean that savings accounts can no longer grow your wealth in real terms – they will cost you money as the purchasing power of your savings decreases over time.
Your existing investment portfolio will need to be reviewed. The assumptions made when you invested in the past may need to be looked at again. Some old blue-chip investments may have become underperformers, while newcomers could offer new opportunities. It is not just equities which will have been affected. Bonds and even commodity investment may need a fresh look.
There will inevitably be a big tax bill for us all to pay. You will need to find tax efficient ways to manage your wealth – or risk the taxman helping himself to a slice of it.
You may need a way to avoid the effects of inflation. Any ongoing fall in the real value of cash will make it unrewarding to keep your wealth as cash savings. Investing may be the best way to preserve and grow the value of your wealth.
Getting some expert help
Recovery means new challenges as well as new opportunities, and if recovery is to be positive for you, you may need a fresh look at all your financial planning.
It is certainly time to look at your investments, but you should not stop there. Your pension plans may need to be looked at again. You may need new solutions to reduce your tax liabilities – and you may even need to look again to make sure you have the best mortgage for your needs.
Get the recovery working to build your wealth
Expert personal advice is vital to take advantage of the recovery. To get our experts working for you, call us now.
Fortunately, it is easy to get the expert help you need. At Continuum we can help you take a fresh look at all your financial arrangements and develop a new coordinated financial plan that recognises the challenges and the opportunities and can build on them to help you reach your goals.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation for investment strategy, you should seek independent financial advice before embarking on any course of action.
The value of investments can fall as well as rise and you may get back less than you invested.