Advisa Insights – March 2024

Newsreaders Welcome

In this edition, we navigate through the UK’s recent economic downturn and signs of resilience. Despite entering a recession in late 2023 and facing challenges, steady inflation rates and a rebound in retail sales highlight underlying strengths. We’ll dissect these key economic events, their implications for the Bank of England’s policies, and more, all within the context of our comprehensive economic calendar.

We will also be covering key financial planning areas: the benefits of contributing towards your UK State Pension, strategies for protecting loved ones through future planning, and insights for a fulfilling retirement.

Join us as we provide guidance on securing your financial future and ensuring peace of mind for you and your family.

National Outlook

Looking at the announcements from our economic calendar last month, the latter half of 2023, the United Kingdom’s economy entered a recession, presenting a challenging environment as the country anticipates this year’s election, where Prime Minister Rishi Sunak has vowed to stimulate economic growth. Official figures indicate that the Gross Domestic Product (GDP) decreased by 0.3% in the quarter ending in December, following a 0.1% decline from July to September.

A recession in the UK is officially recognised when the GDP diminishes for two consecutive quarters, highlighting that even minimal quarterly GDP reductions signify a recessionary phase.

The unemployment rate in the UK rose slightly to 3.8% in December 2023, from 3.9% the prior month. This compares to a peak unemployment rate of 5% in the three months leading to January 2021, marking the highest level since August 2016.

In a surprising turn, British inflation remained constant at 4.0% in January, contradicting expectations of an increase and providing some respite for the Bank of England (BoE) and Prime Minister Sunak ahead of the anticipated national election. Forecasts had predicted inflation to rise to 4.2%.

Core inflation in Britain, which excludes the prices of food, energy, alcohol, and tobacco, also stayed steady at 5.1%, according to the Office for National Statistics.

Investors are increasingly betting on the BoE lowering interest rates this year, with a 72% likelihood of a reduction as early as June. This comes after consumer price inflation, which peaked at 11.1% in October 2022, is expected to continue declining, potentially leading to a reduction in borrowing costs from their highest in 16 years.

British retail sales saw a significant uptick in January, the largest in nearly three years, as consumer spending rebounded, indicating the economy’s potential swift recovery from the recent recession. Sales volumes surged by 3.4% from December, marking the largest increase since April 2021 and a recovery from a 3.3% decline in December, attributed partly to the impact of Black Friday sales in November.

Do you have a UK National Insurance number and have you considered buying back years towards your UK State Pension?

If you are aged between 40 to 73 and have worked in the UK for a minimum of 3 years at any time in your working life, you need to consider this as it could be transformational to funding your retirement. Typically, Jersey residents who have been contributing into the Jersey Social Security system are eligible to buy back years for only £163.80 per year. This is incredible value when you consider a full UK pension currently pays £203.85 per week.

Read more our guide to your financial well-being

Love Beyond Life: Planning to Protect Your Loved Ones

Planning for the future ensuring that our care and support for our loved ones endure beyond our lifetime. How can you protect your family financially and emotionally, ensuring your love transcends even in your absence.

In this article we will cover:

  • The Essence of Forethought
  • Life Insurance: A Pillar of Protection
  • Choosing the Right Policy
  • Estate Planning: Ensuring Your Legacy
  • Lasting Power of Attorney (Medical): Your Wishes in Critical Moments
  • Communicating

Read more about Protecting Your Loved Ones

Planning For Your Retirement: A Journey to Your Ideal Future

Retirement is not just a phase of life; it’s a milestone that opens the door to new possibilities, adventures, and a time for reflection on what we truly value. However, the shape and substance of retirement can vary widely from one person to another.

What does retirement look like for you?

This question is both exciting and daunting. In the first part of our series on Retirement Planning, we’ll explore the myriad ways to retire, activities you might engage in, the importance of mental health, and potential hurdles that could impact your retirement timeline and experience.

In this article we will cover things to take into consideration when planning for your retirement:

  • Where will you retire?
  • Different Ways to Retire
  • Envisioning Your Retirement Activities
  • Mental Health in Retirement
  • Potential Roadblocks to Your Ideal Retirement

Read more about Planning For Your Retirement

Key Local News

Jersey’s Housing Affordability Challenges Amidst Falling Prices and Rising Rates

Despite a notable annual decrease in property prices, the highest since 1986, housing has become less affordable due to rising mortgage rates. The drop in prices by 3% in 2023 hasn’t offset the impact of increased interest rates on affordability. Optimism remains that affordability could improve with potential reductions in the Bank of England base rate. The government is actively working to enhance home ownership and rental options, exploring measures to promote more competitive lending rates for buyers.

Jersey Government’s £58 Million Consultancy Spend in 2023: Investing in Expertise

The Jersey government expended nearly £58 million on consultancy fees throughout 2023, a substantial increase from the previous year’s expenditure. This significant sum was allocated across various departments, with the aim of leveraging external expertise to enhance operations and implement strategic initiatives. The spending highlights the government’s reliance on consultants to address complex challenges and drive efficiency improvements, despite the considerable financial outlay involved.

£10 million home-buying scheme launched today

A £10 million shared-equity scheme, “First Step,” has been launched by the Housing Minister to aid Islanders in purchasing homes. Administered with Andium Homes, it offers up to 40% government funding for first-time buyers towards existing properties. Applicants must provide a 5% deposit and qualify for maximum lending from partner mortgage lenders. The scheme aims to assist around 60 households initially and boost market turnover. Three application rounds are planned, with the first open now until April 2. Deputy Mézec intends to seek more funding if successful. Deputy Warr hopes it will help address the affordability gap for many Islanders. Interested applicants should register on Andium’s website.

British Airways criticised for ‘withholding information’ about luggage that was left behind in Jersey

A businessman criticised British Airways for failing to load luggage onto a London-bound flight due to high winds. CEO Tim Coughlin had to cancel his trans-Atlantic trip after being informed upon arrival in London that his luggage wouldn’t arrive in Canada for three days. He returned to Jersey and plans to fly to Canada via London later. Coughlin criticised BA for not informing passengers earlier and raised concerns about passenger safety and vital items in luggage. BA apologised and is resolving the issue, though it’s unclear why baggage might be delayed until Friday. Coughlin raised legal concerns about BA’s handling of the situation.

Royal Square celebration for record-breaking Atlantic rowers

A record-breaking four-woman crew completed a 3,000-mile row across the Atlantic, becoming the oldest female crew to achieve such a feat. The Intrepid 232 crew’s accomplishment will be celebrated at a special event in the Royal Square on Saturday, March 2. The event will feature the crew in an open-top vehicle, live music, and a Q&A session. Bailiff Sir Timothy Le Cocq praised their determination and teamwork, while Chief Minister Deputy Lyndon Farnham highlighted the community’s support. The public is encouraged to arrive by 2:45 pm for entertainment by the Band of the Island of Jersey.

Is the Island ready for a ‘set-jetting’ boost?

Visit Jersey is optimistic about featuring the island on TV to boost tourism. Recent appearances on shows like BBC’s The Apprentice led to a significant increase in website traffic and referrals to local businesses. Similar spikes occurred with previous TV features, indicating the effectiveness of “set-jetting” in driving tourism. Visit Jersey’s CEO, Tricia Warwick, emphasised the positive portrayal of the island and the importance of local pride in promoting it. The goal is to revitalise tourism and recapture past successes.

Next month’s Economic Calendar

What may impact your money?

Let’s explore some key announcements next week that may have a significant impact on global markets, inflation and interest rates:

Key events, explained:

BoE Interest Rate Decision: An interest rate tells you how high the cost of borrowing is, or high the rewards are for saving.

Unemployment Rate: The unemployment rate is one of the primary economic indicators used to measure the health of an economy. It tends to fluctuate with the business cycle, increasing during recessions and decreasing during expansions. It is among the indicators most commonly watched by policy makers, investors, and the general public.

Inflation Rate: Inflation is the rate at which prices are rising over time. For example, if a loaf of bread costs £1 and that rises by 10p, then bread inflation is 10%. Price rises have been getting faster since February 2021, when the CPI rate was just 0.4%.

GDP Growth Rates: Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health.

Retail Sales: The primary purpose of the Retail Sales Index (RSI) is to produce a short-term measure of the changes in the volume and value of sales of goods by retail businesses in Great Britain, providing a timely indicator of economic performance and strength of consumer spending.