Monthly Newsletter – June 2023

2 June 2023



Royal Ascension (of prices)
Seventy years on from the crowning of Queen Elizabeth II, Charles III, her son, is starting a reign that looks far different to the start of his mother’s looking at the key economic markers and graphs.
Fit for a King – The cost of your castle.
Source: Nationwide,M&G (March 2023)
The average house price today is 130 times higher than in 1953. As the above chart shows, there has been a sharp rise in the last 30 years. 15 million of us own our home compared to 4 million in 1952, but the last time homes were as expensive relative to wages was when Queen Victoria was on the throne in 1876.
This could be of interest, your majesty.

Source: 7IM/Bloomberg Finance LP 
This chart shows that although many of us have become used to low inflation (2-3%) up until the last couple of years, periods of low inflation are the exception rather than the rule. The UK was faced with more challenging inflation environments during Queen Elizabeth’s reign, particularly in the 70s, 80s and 90s.

Source: ONS (April 2023)
Where will inflation go from here? A number of long-term trends which have helped to keep inflation low for the past few decades, technology (online shopping, providing some downward pressure on prices), globalisation (e.g. the flow of cheaper labour and goods to developed countries) and demographics (ageing population) will remain strong. Although things could be changing, as with globalisation where many economies looking to relocate jobs closer to home.
The Royal Household
Source: This is Money (May 2022), ONS (Feb 2023)
Household costs have also risen but spending patterns have changed. Only 1% of spending is on tobacco as Britain is no longer a nation of smokers. This compares to 6% in the 1950s. However, spending on alcohol has remained stable, spending dropped 1% to 2%, but it costs a lot more to enjoy a pint of lager as the graphic shows. As clothing has become more affordable, Britons are spending 4% of their income on clothing compared to a tenth in 1952.
As Britain has embraced technology, the basket of goods used to calculate inflation has changed over the past 70 years. Fridge/freezers, security cameras, smart phones and PCs have replaced sowing machines, hand wringers. writing paper and ink. Pipe smoking has been replaced by e-cigarettes, and those constructing the basket in 1953 would be amazed by the items included today, package holidays, tv subscriptions and university tuition fees.

A Not so Royal Mint

Source: Bloomberg (May 2023)

Gold prices remained stable until 1971. This was when President Nixon abandoned the Bretton Woods system where the dollar was pegged to the price of gold. The price of gold subsequently increased in the following 50 years. Interestingly, there is a clear connection with the stability of the GBP-USD rate and the collapse of the Bretton Woods global arrangement. If Charles III were to sell the Imperial Crown today and spend the proceeds on a U.S. holiday, his sterling wouldn’t go as far as it would have if his mother had done the same after her coronation as the next graph shows.

Source: Bank of England/Bloomberg (April 2023) Indebted to the King…or rather the government indebted to investors! (May 2023)
This chart shows that when both monarchs ascended to the throne the debt to GDP ratio were in a similar position. History shows us that the ratio rises following times of national crisis which dictates a significant increase in government spending. We see in the chart that prior to the World Wars, debt to GDP was highest during the Napoleonic Wars. Charles III is crowned after a different national crisis. The Global Financial Crisis and Covid have caused the national debt to increase sharply and recently the ratio has
.surpassed 100% once again after 55 years with the ratio in double digits.
Charles III ascends to the throne in a nation that is a very different country to when his mother became monarch in 1953. The UK may look in a similar state, debt to GDP is in a similar condition and the base rate is akin to that of 1953, however, trends are in the opposite directions. Citizens of the UK are living lives completely different to those living in 1953. Although the roofs over our heads are costing much more, we are  living longer and healthier lives. What will these charts show by the time the next coronation comes around?



Reasons to be cheerful – 20 ways the world is getting better

Ben Carlson, a USA based IFA, has been constantly reading about how the world is only getting worse, political instability, natural disasters, murder disease, an endless list of bad news. As he puts it “Every year people label the current year the worst year ever, but these people have obviously never read a history book”.  After reading books which methodically go through data showing how human ingenuity and innovation have created massive global progress, he gives the following examples of positivity:
  1. Over the past 20 years the proportion of people living in extreme poverty has almost been cut in half.
  2. Just 200 years ago, 85% of the world’s population lived in extreme poverty. 20 years ago, it was just 29%. Today only 9% live in extreme poverty while around the globe 75% live in middle income countries.
  3. In 1800, among all babies who were ever born roughly half died during their childhood. Life expectancy was just 30 years, no country had a life expectancy above 40. The average life expectancy around the world today is 72.
  4. The number of deaths from natural disasters is 25% of what it was 100 years ago.
  5. Flying has become 2,100 times safer over the past 70 years.
  6. Between the late Middle Ages and the 20th century, European countries saw a 10-fold to 50-fold decline in their homicide rate.
  7. In 1870, the share of homes that had electricity was zero. Today 85% of people have electricity.
  8. There was limited entertainment available to the average family in 1870. Theatre (depending on where you lived), travelling musicians, circus, board or card games.  Now entertainment options are unlimited.
  9. More than 37% of deaths in 1900 were from infectious diseases, the number was just 2% by 2009.
  10. Retirement is still a relatively new concept. In the past people simply worked until they died.
  11. Time spent on laundry fell from 11.5 hours a week in 1920 to 1.5 hours in 2014.
  12. Early in the 19th century,12% of the world could read. Today its 83%.
  13. The world’s nuclear stockpiles have been reduced by 85% since the Cold War.
  14. Every single country in the world today has a lower infant or child mortality rate than it did in 1950.
  15.  Between 2000 and 2015, the number of deaths from malaria fell by 60%.
  16. The control of infectious disease since 1990 has saved the lives of more than 100 million children.
  17. Since 1995, 30 of the world’s 109 developing countries have seen economic growth rates which amount to the doubling of income every 18 years.
  18. Roughly half of the world’s adults own a smartphone.
  19. In 1850 just 7% of the world’s population lived in a free or relatively free society. Now the number is closer to 66.66%.
  20. In 1820 more than 80% of the world was unschooled. It is estimated that by the end of the century this number will be close to zero.
Ben Carlson



Understanding Care Annuities: Securing Peace of Mind for Long-Term Care

As individuals approach their later years, the need for long-term care becomes an important consideration. The rising costs associated with care services can significantly impact financial stability. To address this concern, the UK offers a financial product known as a care annuity. In this article, we explore the concept of care annuities, their benefits, and how they provide a valuable solution for individuals requiring long-term care.
  1. What is a Care Annuity?
A care annuity, also known as an immediate needs annuity, is a financial product designed to provide a regular income to cover the cost of long-term care. It is typically purchased by individuals who require residential or nursing care and want to ensure that their care expenses are met for the rest of their lives.
  1. How Does a Care Annuity Work?
When an individual purchases a care annuity, they make a lump sum payment to an insurance company in exchange for a guaranteed income stream. The amount of the income is determined based on various factors, including the individual’s age, health condition, and the level of care required. The annuity payments can be made directly to the care provider or to the individual, ensuring that the individual’s care expenses are covered for as long as they need it. If former, there will be no tax to pay.
  1. Benefits of Care Annuities:

a. Financial Security: One of the primary benefits of a care annuity is the financial security it provides. With a care annuity in place, individuals and their families can have peace of mind knowing that the costs of long-term care are covered. This eliminates the worry of depleting savings or assets to pay for care services, allowing individuals to focus on their well-being.

b. Fixed Income: Care annuities offer a fixed income stream, providing predictability and stability. This allows individuals to plan their finances effectively, knowing that they will receive a consistent amount each month to cover their care expenses. The guaranteed income helps individuals avoid unexpected financial burdens and provides a sense of financial control during a challenging period.

c. Protection against Rising Care Costs: The cost of long-term care can increase over time, and this can put a strain on an individual’s finances. With a care annuity, individuals are protected against rising care costs. The regular income payments are designed to keep pace with inflation or may include annual increases to ensure that the income remains sufficient to cover care expenses as they change over the years.

d. Tailored to Individual Needs: Care annuities can be customised to meet the specific requirements of each individual. Factors such as the level of care needed, pre-existing medical conditions, and desired coverage can be taken into account when structuring the annuity. This flexibility ensures that individuals receive an income that aligns with their unique circumstances and care needs.

A care annuity provides a valuable financial solution for individuals in the UK who require long-term care. By securing a regular income to cover care expenses, individuals and their families can find peace of mind in knowing that their needs will be met without depleting savings or assets. The benefits of financial security, a fixed income, protection against rising care costs, and customisation make care annuities an attractive option for those in need of long-term care. It is crucial for individuals to seek professional advice and carefully consider their circumstances before making a decision regarding a care annuity, ensuring that they choose the best option.

Anna Griffiths – Technical Manager Clear Financial Advice.





Clear Minds Event

The first meeting of the trustees and counsellors working with Clear Minds took place in York this month. Amongst the attendees was the charity’s first success story who shared her journey through the therapy sessions which were funded by Clear Minds. She is now studying to become a therapist herself which is a great example and endorsement of the work being done.












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