Monthly Newsletter – June 2024

1 June 2024

Retirement planning… Why the past two years have provided uncertainty to the next generation of retirement savers…

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The Fear of Retirement Planning

More than half of UK adults fear their retirement standard of living will be lower than that of previous generations, according to new research by SmartSave.

The digital bank found that 54% of UK adults believe their retirement lifestyle will be worse than their parents’ or grandparents’. Additionally, over a third (37%) of employed individuals expect they won’t be able to financially support their children or grandchildren.

The survey also revealed that two-fifths (40%) of respondents feel financially worse off than they were two years ago, with this figure rising to 46% among those aged 35-54.
Moreover, just over a fifth (22%) expressed that if the cost of living continues to rise, they would be forced to reduce or stop their pension contributions. In the light of these concerns, 23% of people are contemplating retiring abroad to escape the high cost of living in the UK.

Andy Mielczarek, CEO of SmartSave, commented that the traditional idea of a “well-earned retirement” is becoming increasingly uncertain for many. He noted, “Savers are more likely to feel that a comfortable retirement is unattainable compared to earlier generations. The drive to save for both one’s own retirement and the future prosperity of one’s family is a significant motivator for success, so the insecurity revealed by these respondents is concerning. Halting pension contributions to manage living costs is unsustainable, and today’s challenges are clearly affecting future prospects.”
Mielczarek emphasised the importance of giving consumers the freedom to achieve their financial goals, particularly in retirement planning. He highlighted that while there are many saving and investing options available today, the financial industry needs to do more to increase public education and awareness. This will help people make informed decisions and secure their desired futures upon retirement.

Anna Griffiths – Technical Manager

Service sector output growth strongest since May 2023.

Activity and new work rise at fastest rates for 11 months
Staff hiring remains subdued
Input cost inflation highest since August 2023.

There was a robust and accelerated upturn in business activity recorded by UK service providers in April, this was endorsed by a renewed strengthening of order books. Respondents to the survey often commented on a boost to sales from improving client confidence along with signs of a turnaround in underlying economic conditions. But there was only a marginal rate of job creation and the lowest in 2024 so far as firms opted to remain focused on limiting margin pressures.

Higher wages, partly driven up by a considerable rise in the National Living Wage in April, meant a sharp overall increase in input costs since August 2023, Meanwhile, prices charged by service sector firms rose at the slowest pace for three years.

In April the seasonally adjusted S&P Global UK Services PMI Activity index stood at 55.0 which was up from 53.1 in March and above the crucial 50.0 no-change value for the sixth consecutive month. Plus the latest reading indicated the fastest rate of business activity growth since May 2023.
Also new order volumes increased at a fair pace in April and to the largest extent for 11 months. Service providers noted that sales pipelines had improved with stronger business and consumer spending, in part linked to greater optimism towards the broader economic outlook.
Higher levels of new work from abroad also boosted total order books in April, with growth the fastest since March 2023 amid ongoing reports of strengthening sales to clients in the US and Asia.

The (false) geography of listed companies

There’s been a lot of buzz around the FTSE 100 hitting new highs in the past few weeks.
This index contains the 100-largest constituents of the London Stock Exchange, and this has been boosted by optimism around interest rate cuts and an easing of geopolitical tensions.
This has been noticed by UK papers. A group of London-listed companies doing well is something worth reporting, and “a win for the UK!”
But looking at the businesses that make up the index, Is it really a win for the UK?
The likes of Shell and AstraZeneca have been the source of such growth recently and because they are so big the wider index benefits.But what is the revenue exposure that these companies have to the UK? Very little:

The fact that many companies operate with a more global outreach has removed much of the importance of their listing country. When companies think about growth, they’re less worried about the domestic economy and more interested in sector consolidation and industry-specific needs. It’s much less a matter of geography.

Looking at London-listed mining company Anglo American last week, for example. ASX-listed (Australia) metals and mining company BHP made an £31bn offer to acquire Anglo American. Is it an investment in the UK? No. It’s more to do with some of AA’s major copper mines that BHP wants a piece of, based on how aggressively this metal is in demand for the production of renewable technology.

Whilst a map offers familiarity and comfort, if we had to set our investment compass, we’d be more inclined to measure where we are by sectors and factors rather than borders.

An old holiday spoiler

The Monetary Policy Committee assembled on Threadneedle St last week, to update the market on where interest rates are going. As ever, the event was less about the headline decision – rates held at 5.25%, shock – but the commentary that surrounded it.

The Bank is forecasting inflation to come down to 1.9% in two years and to 1.6% in three years. A key takeaway was governor Andrew Bailey expressing optimism, and even suggesting:
”Rates could come down faster than market expectations.”

But the question this leads to is:
“If inflation is falling and is forecast to drop to below the 2% target, why ‘hold’….what are they waiting for?!”
Good question!

If, like us, you’ve found yourself scanning the internet for a place in the world that has more than 48 hours of nice weather, you’ll have part of the answer…

There are reasons to feel optimistic about the economy, and with prices slowly going down, it’s easy to forget that some pockets of the inflation basket have been more stubborn than anticipated.
Despite being a distant memory, the pandemic squeezed a large number of businesses, many of which sit within in the services sector (including travel!).With this sector trying to meet its needs, prices have gone up by almost 30% since Covid-19 and the Bank said there are still some signs of inflation persistence, with services inflation standing at 5% in March.

As the Monetary Policy Committee grapples with when to stick or twist, it’s worth keeping in mind your summer holidays. Even though travel restrictions are no longer a problem, we can only do so (literally) at the expense of a four-year-old foe!

Interesting Financial summer facts.

Percentage of Brits going on holiday by annual income (%)

We are very fortunate to have a friend of Clear Minds, Jeremy Rushworth fundraising on behalf of the charity by undertaking the Handsling Bike Coast to Coast challenge on 22^nd June.

This 150 mile cycle challenge begins at Seascale and ends at Whitby, travelling through the Lake District, across the Yorkshire Dales, the Vale of York and the North York Moors. This is a popular cycling route normally undertaken over four to five days, but this event will take place over ONE DAY!!

Please consider supporting Jeremy on his quest by donating through the following link or QR code.

All funds go directly to pay for counselling sessions for those in long term therapy who are in financial difficulties. The charity is currently working with 15 therapists supporting 25 clients.

Click here to donate

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