THIS The Queen’s Speech, read by someone other than the Queen for the first time in nearly 60 years, has been surrounded by a ring of threats to living standards not seen in more than a generation. It was also an opportunity for the government to relaunch its economic strategy in the wake of the pandemic and Brexit.
There is a growing emphasis on alleviating pressures on family finances and growing the economy through “race to the top”, but also on some minor liberalization measures that are supposed to be made possible only by Britain’s exit from the EU.
From a financial perspective, the biggest omission was a pensions bill, which could have led to automatic enrollment of 18-year-olds and higher contributions. While automatic enrollment in workplace pension plans has helped millions of workers save for their future, there are still a significant number of people who fall through the cracks, such as part-time workers in under 22, who are on zero- hourly contracts and/or earn less than £10,000 a year.
The 2017 review of auto-enrollment recommended removing income brackets, so that every pound earned qualifies for an employer matching contribution and the reduction of the minimum age of eligibility from 22 to 18 years old. This must make the next Queen’s Speech in 2023 to have any hope of being implemented by the mid-2020s, as planned.
In the meantime, those looking to help the next generation secure a decent retirement income should look to junior RHAs. Although you must be over 22 to be eligible for automatic enrollment, with a Junior SIPP you can start investing in your children’s future the day they are born. Junior SIPPs are becoming increasingly popular among investors, you can contribute as little as £20 per month while enjoying 20% annual tax relief on up to £2,880 per year, bringing your total at £3,600.
What this Queen’s Speech really highlights is the dilemma of government trying to deliver on the promises of the manifesto in a rapidly changing world.
Many of the current pressures on Britain’s economic prosperity are coming from abroad – the ongoing war in Ukraine, China’s economic slowdown and the long-term effects of the pandemic on consumer sentiment and global supply chains , for example.
The short-term investment outlook is undeniably fraught with uncertainty and caveats. The rate at which companies are increasing profits has slowed, inflation is on the rise and recent declines in bond markets have reduced the attractiveness of equities on a relative basis.
Some of these pressures are bound to ease. Strained supply chains are expected to become less strained as the world continues to adjust to post-lockdown life. The price of oil has at least come down from its peak in March, suggesting national energy bills may rise somewhat less in October than recently feared.
In these uncertain times, it can be difficult to put something aside for the future. But don’t underestimate the power of small amounts, especially when it comes to retirement savings.
Broadly speaking, a successful longer-term strategy normally involves maintaining a diversified investment portfolio, prepared in advance for rapid changes in the relative outlook of different countries and different asset classes such as stocks and bonds.
A simple way to do this is to invest in a multi-asset fund, where the amounts allocated to countries and different types of assets are constantly monitored and adjusted as needed.
An example of a fund that does just that is the Fidelity Select 50 Balanced Fund. This broadly diversified fund stands out because it invests primarily in funds chosen by Fidelity’s experts for the Select 50 list.