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Divorce is often a highly emotional process, and one of the biggest concerns for many people is:

“Will I lose my pension?”

While pensions are usually protected under UK law, it is possible for one party to end up with less retirement income than they anticipated if pensions are overlooked, undervalued, or not planned for correctly.

Understanding how pensions are treated in divorce, and taking practical steps to protect your retirement income, can make a significant difference to your long-term financial security.

Why pensions matter in divorce

Pensions are often one of the largest financial assets in a marriage or civil partnership. They are considered marital or matrimonial assets, meaning they are included in the overall divorce financial settlement.

The reason pensions are so important is simple:

• They represent future income, often for decades
• They are generally protected from creditors and most immediate liabilities
• Incorrectly handled pension division can leave one party with insufficient funds for retirement

Failing to address pensions carefully during divorce is a common reason long-term financial difficulties arise, even when other assets are divided fairly.

Understand your pension type

The first step in protecting your pension is to understand its type and rules, as this affects how it can be divided:

• Defined Contribution (DC) pensions – These are generally straightforward to split; they have a cash value based on contributions and investment growth.
• Defined Benefit (DB) or final salary pensions – These provide guaranteed income in retirement and often require specialist actuarial advice to value accurately.
• Public sector pensions – Usually subject to specific rules that may limit transfer or sharing options.
• Self-Invested Personal Pensions (SIPPs) – Flexible, but still subject to pension sharing orders.

Knowing the type of pension you hold is essential for accurate valuation and to ensure your retirement income is not unintentionally reduced.

Obtain accurate pension valuations

Valuation is a critical part of pension protection. There are three main approaches:

Cash Equivalent Transfer Value (CETV)

• Provided by the pension provider
• Shows the amount that could be transferred to another pension
• Often used as the starting point for sharing negotiations

Actuarial valuation

• Provides a detailed assessment of defined benefit pensions
• Factors in guaranteed income, inflation, and life expectancy
• Used where CETVs may not reflect true long-term value

Statement estimates

• Annual statements or projections
• Useful for general understanding but not sufficient for divorce settlements

Accurate valuations ensure the pension is properly considered alongside other assets in your financial settlement.

Know the main ways pensions are divided

There are three primary methods of dividing pensions in a divorce:

1. Pension Sharing Orders

• Transfers a percentage of one person’s pension into a separate pension for the other party
• Creates a clean break, with each person having their own pension
• Most common and generally the preferred method for long-term security

2. Pension Offsetting

• One party keeps a larger share of the pension while the other receives greater portions of other assets, such as property or savings
• Requires careful analysis to ensure fairness and avoid long-term financial disadvantage

3. Pension Attachment Orders (Earmarking)

• Directs future pension payments to the ex-spouse
• Less common today because it does not provide a clean break and payments depend on the original pension holder retiring

Understanding these options helps you protect your pension and plan effectively for retirement.

Protect your pension during negotiations

To avoid losing pension value or being disadvantaged:

• Include all pensions in full financial disclosure
• Seek specialist valuations, especially for final salary schemes
• Consider the long-term income impact rather than only the headline cash value
• Avoid informal agreements — always secure legally binding orders

Neglecting these steps can unintentionally reduce your retirement income or create disputes later.

Think long-term

Protecting your pension isn’t just about the settlement today,  it’s about securing future retirement income. Key considerations include:

• Timing of withdrawals and retirement age
• Investment growth or inflation assumptions
• Tax implications of transfers or withdrawals
• Potential trade-offs with other assets

A settlement that looks fair in headline terms may still leave one party worse off decades later if long-term planning is ignored.

Use financial planning to regain control

A specialist financial planner can help you:

• Interpret pension valuations and projections
• Compare sharing versus offsetting scenarios
• Use cashflow modelling to forecast retirement income
• Understand trade-offs with property, savings, and other assets
• Work alongside solicitors to ensure pension protection is legally robust

This process brings clarity, reduces emotional stress, and helps ensure your settlement supports independence and security.

Common mistakes to avoid

• Ignoring pensions in the negotiation process
• Relying solely on CETVs for defined benefit schemes
• Offsetting pensions against other assets without analysis
• Making assumptions about retirement needs
• Failing to secure proper legal orders

Professional advice is key to avoiding these pitfalls.

Final thoughts

Pensions are a critical part of long-term financial security, and protecting them during divorce requires knowledge, planning, and professional guidance. Making informed decisions today can prevent significant issues in retirement.

At Lamb Financial, we specialise in helping individuals protect and optimise their pensions during and after divorce. We work alongside family solicitors to provide clear, practical advice, helping you understand your options and make confident decisions.

If you would like to discuss how financial planning can help you protect your retirement income and feel more secure during and after divorce, contact Lamb Financial for a confidential conversation.

Divorce or separation can create uncertainty not just for parents, but for children as well. One of the most common concerns clients have is:

“How can I make sure my children are financially secure?”

Supporting children financially after divorce involves more than simply covering day-to-day expenses. It requires careful planning, clear understanding of entitlements, and consideration of long-term needs like education and lifestyle. By taking a step-by-step, future-focused approach, parents can protect their children’s financial security and reduce stress for the whole family.

Understand child maintenance and entitlements

In the UK, child maintenance is usually calculated according to standard guidelines, taking into account:

• The non-resident parent’s income
• Number of children
• Existing care arrangements

Child maintenance may cover basic living costs such as food, clothing, and housing. It is essential to understand your legal obligations and entitlements to ensure that children are supported fairly.

Additional considerations include:

• Government assistance or benefits for children
• Specific agreements between parents regarding extra expenses, such as childcare or extracurricular activities

Understanding what is expected legally and practically is the first step to protecting children’s financial wellbeing.

List all children’s costs

Beyond basic maintenance, it’s important to create a detailed list of all costs associated with your children’s care. Typical expenses include:

• Housing and utilities: A share of rent or mortgage if children live with you
• Food and clothing: Regular weekly or monthly costs
• Childcare or school fees: Nursery, private school, or after-school care
• Transportation: Public transport, fuel, or car-related costs
• Healthcare: Medical, dental, or specialist treatment
• Activities and hobbies: Clubs, lessons, and social activities

Breaking down expenses in this way helps you see the true cost of supporting your children and ensures nothing is overlooked.

Plan for long-term needs

Supporting children financially after divorce isn’t just about immediate costs. Parents should consider long-term expenses, including:

• Secondary school and university fees
• Gap years or vocational training
• Special requirements such as healthcare or educational support
• Future extracurricular costs and lifestyle expectations

By accounting for both short-term and long-term needs, you can avoid surprises and ensure that children continue to enjoy stability throughout their upbringing.

Consider shared custody and parental contributions

If children spend time with both parents, it’s important to coordinate contributions fairly:

• Determine how costs will be split for housing, schooling, and activities
• Decide who covers irregular or one-off expenses
• Keep a record of agreements and payments to prevent misunderstandings

Clear communication and a structured approach help reduce conflict and ensure children benefit from both parents’ resources.

Factor in changing circumstances

Life after divorce can be unpredictable. Financial planning for children should take into account potential changes in:

• Income levels for either parent
• Employment status or career changes
• Relocation or change in living arrangements
• Unexpected expenses, such as healthcare emergencies

Planning for flexibility helps ensure that children remain supported even if circumstances change.

Use cashflow modelling for clarity

One of the most effective tools for calculating financial needs for children is cashflow modelling. This allows parents to:

• See how income and expenses balance month by month
• Compare different custody or maintenance scenarios
• Understand the impact of education or lifestyle costs over time
• Identify potential shortfalls before they occur

Cashflow modelling provides confidence that children’s financial needs are met while helping parents make informed decisions about the wider divorce settlement.

Avoid common mistakes

Some common mistakes parents make include:

• Underestimating long-term costs such as university or lifestyle expenses
• Ignoring irregular or one-off expenses
• Failing to coordinate financial responsibilities with the other parent
• Relying solely on child maintenance without considering full living costs
• Not planning for inflation or changing circumstances

Professional guidance can help you avoid these pitfalls and ensure a realistic, sustainable plan.

Work with a financial planner

A specialist financial planner can:

• Translate child-related expenses into a clear, structured budget
• Use modelling to forecast short-term and long-term needs
• Help coordinate financial arrangements with legal agreements
• Provide reassurance and clarity during a stressful time

Financial planning allows parents to approach child support with confidence, ensuring both fairness and security.

For further support and advice, you can also explore our related resources:

• Divorce Assets Advice — understand how overall assets are divided
• Divorce Pension Advice — see how pensions may impact your settlement
• Pension Planning for Divorce — plan for future retirement alongside child support

Final thoughts

Supporting children financially after divorce is about far more than meeting basic needs. It’s about ensuring stability, security, and the ability to maintain a reasonable lifestyle, both now and in the future.

With clear planning, accurate projections, and professional advice, parents can protect their children’s financial wellbeing, reduce conflict, and approach post-divorce life with confidence.

At Lamb Financial, we specialise in helping families navigate the financial complexities of divorce. We work alongside family solicitors to provide practical, personalised advice that ensures children are supported and parents have peace of mind.

If you would like to discuss how financial planning can help you meet your children’s needs and feel secure during and after divorce, contact us for a confidential conversation.

One of the most common areas of uncertainty for divorcees during the divorce and separation process is pension sharing. Many people struggle to understand how pensions are treated in a divorce, how they are valued, and what options are available to ensure a fair settlement.

While pensions are often among the most valuable marital assets, with clear guidance and planning, you can protect your retirement income and make confident decisions.

Why are pensions included in divorce settlements?

In the UK, pensions are usually considered marital assets, meaning they are taken into account alongside property, savings, and other investments. This applies to:

• Defined contribution pensions
• Defined benefit (final salary) pensions
• Public sector pensions
• Self-invested personal pensions (SIPPs)

Ignoring pensions in negotiations can leave one party with significantly less retirement income, even if other assets are divided fairly. That’s why understanding pension sharing is crucial, and why we’ve created a step-by-step guide to help you do so.

Step 1: Understand the main types of pension sharing

There are three primary ways pensions can be addressed in a divorce settlement:

1. Pension Sharing Orders

• A percentage of one party’s pension is transferred to a separate pension in the other party’s name
• Provides a clean break, so each person has their own pension moving forward
• The most common and often preferred method

2. Pension Offsetting

• One person keeps more of the pension, while the other receives a larger share of other assets (e.g., property or savings)
• Requires careful calculation to ensure fairness and avoid long-term disadvantage

3. Pension Attachment Orders (Earmarking)

• A portion of future pension payments is directed to the ex-spouse
• Less common today because it depends on the original pension holder retiring and does not create a clean break

Understanding these options helps you see the choices available and make informed decisions.

Step 2: Get an accurate valuation

Pension sharing depends on knowing the true value of the pension. There are three main ways pensions are valued:

• Cash Equivalent Transfer Value (CETV): The amount that could be transferred to another pension; commonly used for defined contribution schemes
• Actuarial valuation: Used for defined benefit schemes to assess guaranteed income and long-term value
• Statement estimates: Useful for general understanding, but not sufficient for legal settlements

Accurate valuations ensure the pension is correctly included in the financial settlement and prevent long-term disadvantages.

Step 3: Protect your pension during negotiations

To avoid losing value or being disadvantaged:

• Include all pensions in full financial disclosure
• Seek specialist valuations, especially for final salary or public sector schemes
• Avoid informal agreements; always secure legally binding orders
• Consider long-term retirement income, not just immediate value

Neglecting these steps can have lasting implications on your financial security.

Step 4: Think about the future

Pension sharing is not just a technical step in divorce; it directly affects your future retirement income. Key considerations include:

• Expected retirement age
• Investment growth and inflation
• Tax implications
• Trade-offs with other assets such as property or savings

By taking a forward-looking approach, you can make decisions that safeguard your financial independence for decades to come.

Step 5: Use cashflow modelling for clarity

One of the most effective tools for understanding pension sharing is cashflow modelling. This allows you to:

• Visualise the impact of different settlement options
• Compare sharing versus offsetting scenarios
• Forecast retirement income and lifestyle affordability
• Identify potential shortfalls before finalising agreements

Cashflow modelling provides a clear, evidence-based picture of your future, reducing uncertainty and stress.

Step 6: Avoid common mistakes

Some common errors people make with pension sharing include:

• Ignoring pensions entirely in negotiations
• Relying only on CETVs for defined benefit schemes
• Offsetting pensions without considering long-term income
• Failing to secure legally binding agreements
• Overlooking tax or inflation effects

Professional guidance can help you avoid these mistakes and ensure your retirement income is protected.

Step 7: Work with a financial planner

Financial planners play a crucial role alongside solicitors. They can:

• Explain pension sharing options in plain English
• Assess long-term income implications
• Model different settlement scenarios
• Ensure decisions are financially sustainable
• Provide reassurance and clarity during a stressful process

Working with a planner gives you confidence that pension sharing decisions support your future, not just the immediate settlement.

Final thoughts

Pension sharing can seem complex, but with the right approach, it doesn’t need to be overwhelming. Understanding your options, obtaining accurate valuations, and planning for the future are the keys to protecting your retirement income and ensuring long-term financial security.

At Lamb Financial, we specialise in helping individuals navigate the financial complexities of divorce, including pension sharing. We work alongside family solicitors to provide clear, practical advice that supports peace of mind, both during the divorce process and in the years that follow.

If you would like to discuss how financial planning can help you understand pension sharing and secure your retirement income during and after divorce, contact us for a confidential conversation.

Divorce or separation can feel overwhelming, and one of the biggest concerns for many people is the family home. It’s common to ask:

“Will I lose my home?”

or

“How can I protect it?”

While the outcome depends on your circumstances, understanding your options, planning carefully, and seeking professional guidance can help you secure your property and safeguard your long-term financial future.

Why the family home matters in divorce

The family home is often the largest asset in a marriage or civil partnership. Beyond its financial value, it can hold emotional significance, making decisions about it particularly challenging.

In UK law, the home is considered a marital asset, meaning it will usually be taken into account alongside savings, pensions, and other investments during divorce settlements. Ownership, mortgage obligations, and equity all influence how the home is treated.

Understand property ownership and rights

Before taking any steps, clarify the legal situation:

• Sole ownership – the property is in one partner’s name only
• Joint ownership – usually as joint tenants or tenants in common
• Mortgage responsibilities – both parties may remain liable even if one leaves the home

Knowing your rights and responsibilities is essential for making informed decisions about whether to keep, sell, or share the property.

Consider your options for the home

There are several potential outcomes when it comes to the family home:

1. Keeping the home

• Often a priority for parents with children
• Requires assessing whether you can afford mortgage payments, bills, and maintenance alone
• May involve negotiating other assets as part of the overall settlement

2. Selling the home

• Common when neither party can afford to retain it
• Equity is split according to the settlement agreement or court order
• Provides liquidity that can be reinvested or used to secure alternative housing

3. Offsetting

• One party keeps the home, and the other receives a larger share of other assets (savings, investments, pensions) to balance the settlement
• Requires careful calculation to ensure fairness and long-term security

Understanding these options helps you make deliberate decisions rather than reacting emotionally under stress.

Factor in mortgages and liabilities

Even if you retain the property, consider your ongoing obligations:

• Remaining mortgage payments
• Property taxes and council tax
• Utilities and maintenance costs
• Insurance (building and contents)

Failing to plan for these ongoing expenses can create financial strain, even if the home itself is retained.

Think about long-term affordability

Protecting the home isn’t just about who owns it today, it’s about whether you can afford it in the future. Consider:

• Changes in income or employment
• Long-term mortgage or rent obligations
• Retirement plans and pension entitlements
• Potential maintenance or renovation costs

A property that is unaffordable in the long term can become a burden, even if you manage to “keep” it initially.

Use cashflow modelling and financial planning

One of the most effective tools for assessing your options is cashflow modelling. This approach allows you to:

• Compare the affordability of keeping versus selling the home
• Factor in ongoing expenses, taxes, and maintenance costs
• Include pensions, investments, and other assets in the analysis
• See how decisions today affect your long-term financial security

Cashflow modelling provides clarity and confidence, helping you make informed decisions rather than emotional ones.

Avoid common mistakes

Some common errors people make regarding the family home in divorce include:

• Overestimating the ability to keep the property alone
• Ignoring other assets when considering trade-offs
• Making informal agreements without legal protection
• Failing to plan for future bills or retirement costs
• Focusing solely on emotional attachment rather than financial sustainability

Professional advice can help you navigate these complexities and avoid costly mistakes.

Work with professionals

Working with a specialist financial planner alongside your solicitor can help you:

• Understand how property fits into your overall divorce settlement
• Assess affordability and long-term implications
• Explore trade-offs between the home and other assets
• Protect your financial future while supporting children, if applicable

This collaborative approach reduces uncertainty and ensures decisions are both legally and financially robust.

For more detailed advice on divorce finances and planning, explore our related resources:

• Divorce Assets Advice — understand how all assets, including property, are divided
• Divorce Pension Advice — see how pensions can impact settlements
• Pension Planning for Divorce — plan for future income alongside property considerations

Final thoughts

Worrying about losing your home in a divorce is natural, but understanding your options, planning carefully, and seeking professional advice can help protect both your property and your long-term financial future.

At Lamb Financial, we specialise in helping individuals navigate the financial complexities of divorce. We work alongside family solicitors to provide clear, practical advice that safeguards assets, supports children, and provides peace of mind. If you would like to discuss how financial planning can help you protect your home and secure your financial future during and after divorce, contact Lamb Financial for a confidential conversation.

Divorce or separation can leave many people unsure about how to manage their finances going forward. One of the most common concerns is:

“Will I have enough to cover my expenses and plan for retirement?”

Calculating your financial needs after divorce is about more than adding up bills. It requires a clear, structured approach that considers current living costs, future obligations, pensions, and long-term lifestyle goals. By taking a step-by-step, future-focused approach, you can gain clarity, control, and peace of mind during a stressful transition.

Step 1: Gather all relevant financial information

The first step in calculating post-divorce financial needs is to collect complete financial information. This includes:

• Income: salary, bonuses, benefits, rental income, or any other sources
• Assets: property equity, savings, investments, and pensions
• Debts and liabilities: mortgages, loans, credit cards, and overdrafts
• Child or spousal maintenance obligations
• Existing financial commitments: insurance, subscriptions, and loans

Having a full picture ensures that calculations are accurate and realistic, reducing the risk of surprises later.

Step 2: Determine your short-term expenses

Start by listing all your essential monthly outgoings after divorce. These typically include:

• Housing costs (mortgage, rent, or property maintenance)
• Utilities and household bills
• Food, transport, and day-to-day living expenses
• Insurance premiums (health, home, car)
• Childcare, school fees, or children’s extracurricular costs
• Debt repayments

Separating essential expenses from discretionary spending helps to clarify the minimum amount of income you need to live comfortably.

Step 3: Plan for one-off and irregular costs

Divorce often comes with unexpected or irregular costs. These may include:

• Legal and solicitor fees
• Moving costs or furnishing a new home
• Vehicle replacement or repairs
• Medical expenses
• Holiday or family commitments

Factoring in these expenses prevents short-term financial shocks and ensures your budget is realistic.

Step 4: Include long-term and future needs

A critical part of post-divorce financial planning is considering your long-term needs, including:

• Retirement income and pension contributions
• Inflation and cost-of-living increases
• Education costs for children
• Healthcare or care in later life
• Potential changes in income or employment

Thinking about the future allows you to see beyond immediate settlements and plan for lasting financial security.

Step 5: Assess your assets and income

Once you have a clear picture of expenses, compare them against your available resources:

• Savings and cash accounts
• Investments, ISAs, and bonds
• Property equity
• Pensions and retirement accounts
• Maintenance payments or entitlements

Understanding your total resources helps identify whether your expected income will cover your lifestyle, both now and in retirement.

Step 6: Consider trade-offs and settlement options

Post-divorce finances often involve trade-offs. For example:

• Keeping the family home vs receiving more liquid assets
• Receiving a larger pension share vs offsetting other assets
• Immediate income vs long-term growth and retirement security

A structured approach allows you to model different scenarios, ensuring that trade-offs are made deliberately rather than by default.

Step 7: Use cashflow modelling for clarity

One of the most effective tools for calculating financial needs after divorce is cashflow modelling. This approach:

• Projects income and expenses over time
• Shows the impact of different settlement options on your lifestyle
• Includes pensions, investments, and inflation
• Identifies gaps or shortfalls before they become problems

Cashflow modelling provides a clear picture of your financial future, helping you make decisions with confidence.

Step 8: Avoid common mistakes

Common errors people make when assessing post-divorce financial needs include:

• Ignoring pensions or undervaluing retirement accounts
• Focusing only on immediate expenses, not long-term costs
• Assuming assets like property or savings are always sufficient
• Forgetting tax implications or investment growth
• Not planning for unexpected or one-off costs

Professional guidance can help you avoid these pitfalls and ensure your calculations are realistic and sustainable.

Step 9: Work with a financial planner

A specialist financial planner can:

• Translate settlement figures into realistic budgets and retirement projections
• Test multiple scenarios using cashflow modelling
• Help you make informed trade-offs between property, savings, and pensions
• Provide reassurance and clarity during a stressful time
• Work alongside solicitors to ensure settlements are financially robust

This guidance can make a significant difference in achieving long-term financial security and peace of mind.

Final thoughts

Calculating your financial needs after divorce is about far more than balancing a spreadsheet. It’s about understanding your income, expenses, and future requirements, so you can make informed decisions that protect your lifestyle and retirement security.

With the right financial planning support, you can gain clarity, reduce stress, and approach negotiations with confidence. Forward-looking planning and modelling not only help avoid mistakes but also give you greater control over your financial future.

At Lamb Financial, we specialise in helping individuals navigate the financial complexities of divorce and separation. We work alongside family solicitors to provide clear, practical advice that supports peace of mind, both during the divorce process and in the years that follow. If you would like to discuss how financial planning can help you calculate your post-divorce financial needs and feel more secure, contact us for a confidential conversation

Divorce or separation can leave people feeling overwhelmed, uncertain, and under pressure to make big financial decisions quickly. One of the most common questions people search for when looking for advice on this is:

What’s the best way to sort finances in a divorce?

The honest answer is that there is no single formula that works for everyone; however, there is a better way, one that reduces stress, avoids costly mistakes, and helps you feel more confident about life after divorce. Let us walk you through it.

Why sorting finances properly matters

Financial decisions made during divorce are often long-lasting. Choices about property, savings, pensions, and income don’t just affect the settlement itself, they shape financial security for years, sometimes decades.

When finances aren’t properly thought through, people can end up:

• Asset-rich but income-poor
• Struggling to afford housing or retirement
• Locked into arrangements that create ongoing conflict
• Returning to court later to resolve avoidable issues

The best way to sort finances in a divorce is not about rushing to an agreement; it’s about making informed decisions with a clear view of the future.

Understand what needs to be sorted

A divorce financial settlement in the UK typically considers the full financial picture, not just what feels most urgent at the time.

This includes:

• Property (including the family home)
• Savings and cash
• Investments
• Pensions
• Income and earning capacity
• Debts and liabilities

It’s important to understand that everything is considered in the context of the whole. Focusing too narrowly on a single asset, such as a house, can create imbalances elsewhere.

Let go of the “50/50 divorce myth”

One of the biggest misconceptions is that assets are always split equally.

In England and Wales, the courts focus on fairness, not strict equality. This means outcomes are influenced by:

• Housing and income needs
• Whether children are involved
• Differences in earning capacity
• Age, health, and retirement provision
• The length of the marriage

A 50/50 split may be a starting point, but it is not guaranteed. Understanding this early can help manage expectations and reduce unnecessary conflict.

Gather full and accurate financial information

Before meaningful discussions can take place, both parties need to provide full financial disclosure. This includes:

• Property valuations and mortgage details
• Bank and savings statements
• Investment account information
• Pension valuations
• Details of debts and liabilities

Incomplete or inaccurate disclosure is one of the main reasons divorce finances become drawn-out and expensive.

Think beyond today’s settlement

One of the most effective ways to sort finances in a divorce is to start with the future, not just the immediate split. Questions to consider include:

• What income will I need long-term?
• How will I fund retirement?
• Can I afford to keep this property on my own?
• What happens if interest rates rise or income falls?

Decisions that feel emotionally reassuring now, such as keeping the family home at all costs, may create financial pressure later if they are not sustainable.

Be cautious with trade-offs

Divorce often involves trade-offs, such as:

• Property versus pensions
• Cash now versus income later
• Certainty versus flexibility

A common mistake is undervaluing pensions when compared to property or savings; while a house provides security today, pensions provide income for life. Understanding the real value of different assets is essential to avoid unintended consequences.

Use financial planning to bring clarity

This is where financial planning adds significant value alongside legal advice. A financial planner can help:

• Explain what asset values actually mean in practical terms
• Compare different settlement options
• Model future income using cashflow projections
• Identify risks and affordability issues
• Keep decisions focused and evidence-based

Cashflow modelling, in particular, allows you to see how today’s decisions may affect your finances over the long term, bringing clarity at a time when emotions can cloud judgement.

Choose the right route to agreement

Financial settlements can be reached through:

• Negotiation between solicitors
• Mediation or other forms of ADR
• Court proceedings

Alternative dispute resolution is often quicker, less stressful, and more flexible, especially when supported by clear financial information.

Whatever route is used, a legally binding financial order is usually essential to achieve certainty and a clean break.

Common mistakes to avoid when sorting finances

Some of the most frequent issues we see include:

• Rushing to reach agreement without understanding long-term impact
• Ignoring pensions or treating them as secondary
• Assuming informal agreements are sufficient
• Focusing on “winning” rather than sustainability
• Not seeking specialist financial input

These mistakes often only become apparent years later, when options are limited.

Why a future-focused approach works best

The best way to sort finances in a divorce is to shift the focus from division to financial independence. A future-focused approach:

• Reduces uncertainty and anxiety
• Helps negotiations stay constructive
• Supports better long-term outcomes
• Can shorten the overall divorce process
• Helps people feel more in control during a difficult time

Rather than reacting under pressure, it allows decisions to be made with purpose and clarity.

Final thoughts

Sorting finances during divorce is about far more than dividing assets; it’s about building a foundation for the next stage of life and ensuring financial security beyond the settlement itself.

With the right financial planning support, it becomes easier to understand your options, see the bigger picture, and make confident decisions during times of uncertainty. Clear analysis and forward-looking planning can also help minimise conflict and avoid unnecessarily prolonged legal battles.

At Lamb Financial, we specialise in helping individuals navigate the financial complexities of divorce and separation. We work alongside family solicitors to provide clear, practical advice that supports peace of mind, both during the divorce process and in the years that follow.

If you would like to discuss how financial planning can help you feel more secure and in control during and after divorce, contact us for a confidential conversation.

Divorce or separation is often as emotionally challenging as it is financially complex. One of the most common concerns people have is: “How do I work out divorce settlement figures?” Understanding the numbers can feel overwhelming, particularly when property, savings, pensions, investments, and debts all need to be considered.

While there is no one-size-fits-all formula in the UK, taking a structured, future-focused approach can help you make informed decisions and reduce unnecessary stress.

This guide outlines a clear step-by-step process to help you work out divorce settlement figures in a way that balances immediate needs with long-term financial security.

Step 1: Gather complete financial information

Before attempting to calculate settlement figures, it’s essential to collect all relevant financial information. Accurate data forms the foundation for fair and practical decisions.

Typical information to gather includes:

• Property details: current value, mortgage balance, and equity
• Savings and bank accounts: balances and joint/individual ownership
• Investments: ISAs, shares, bonds, and other portfolios
• Pensions: valuations for each scheme, including Cash Equivalent Transfer Values (CETVs)
• Income and outgoings: salary, bonuses, benefits, and monthly expenses
• Debts and liabilities: loans, credit cards, and overdrafts

Incomplete information is one of the main reasons divorce financial settlements are delayed or disputed. Being thorough at the outset can save time, reduce stress, and avoid costly errors.

Step 2: Understand what needs to be divided

In a divorce, the court or negotiating parties will usually consider all matrimonial assets and liabilities. These can include:

• Property: Family home, buy-to-let, or other real estate
• Savings and cash: Individual and joint accounts
• Investments: Shares, ISAs, investment bonds, and other portfolios
• Pensions: Often one of the largest assets, requiring specialist valuation
• Debts: Loans, credit cards, and mortgages

It is important to remember that the goal is fairness, not necessarily an exact 50/50 split. Needs, contributions, future income, and retirement provision all influence the final settlement.

Step 3: Decide on the valuation method

Once all assets are identified, the next step is to determine their current and projected value. For some assets, such as savings or cash, this is straightforward. For others, including property and pensions, valuations can be more complex.

Property

• Obtain a professional valuation if needed
• Deduct mortgage and other liabilities to calculate equity

Pensions

• Use CETVs for defined contribution pensions
• Consider actuarial valuations for defined benefit (final salary) schemes
• Understand how pensions interact with other assets if offsetting is considered

Investments

• Use the most recent statements and factor in potential growth or risk

Accurate valuations are critical, as they directly influence how settlement figures are calculated and ensure outcomes are sustainable.

Step 4: Consider short-term needs vs long-term security

A common mistake is focusing exclusively on immediate outcomes, such as who gets the family home or access to cash, without considering long-term implications.

Key considerations include:

• Housing affordability after divorce
• Income and expenditure in retirement
• Investment growth and inflation
• Tax implications of transferring or liquidating assets
• Protection of pensions and other deferred benefits

Working out settlement figures with a future-focused lens ensures that decisions today support financial independence tomorrow.

Step 5: Use a structured approach to calculating the settlement

Once assets are valued and priorities identified, the figures can be calculated using one of several methods:

1. Equal division

• Starting point for discussion, but not always fair
• Adjusted based on needs, contributions, and circumstances

2. Offsetting

• One party keeps more of a specific asset (e.g., the house) while the other receives additional assets of equivalent value
• Requires careful calculation to account for pensions and long-term implications

3. Pension sharing

• A percentage of one person’s pension may be transferred to the other via a Pension Sharing Order
• Provides a clean break and helps balance long-term income

While these methods are common, complex settlements often require professional input to ensure accuracy and fairness.

Step 6: Factor in alternative dispute resolution (ADR) or court outcomes

Settlement figures are ultimately formalised through negotiation, mediation, or court proceedings. Having clear figures and evidence helps:

• Support constructive negotiation
• Reduce reliance on costly court hearings
• Ensure agreements are legally enforceable

Using financial planning tools, such as cashflow modelling, allows both parties to visualise the impact of different settlement scenarios and make informed decisions.

Step 7: Avoid common mistakes

Many people trying to work out settlement figures on their own make errors that can affect long-term financial security, including:

• Overlooking pensions or valuing them incorrectly
• Assuming informal agreements are sufficient
• Focusing solely on headline asset values
• Ignoring debts, liabilities, and ongoing costs
• Failing to plan for retirement or future income needs

Professional guidance can help prevent these pitfalls and provide a more robust, reliable settlement.

Step 8: Bring in financial planning expertise

A specialist financial planner can:

• Translate asset values into realistic retirement income projections
• Model multiple settlement scenarios to see long-term outcomes
• Provide clarity and reassurance in a stressful process
• Work alongside solicitors to ensure figures are legally robust

This approach helps you retain control, reduce emotional stress, and avoid costly mistakes.

Final thoughts

Working out divorce settlement figures is about far more than arithmetic. It is a process that requires understanding assets, liabilities, future income, and long-term financial security. Decisions made today can affect your lifestyle and independence for years to come.

With clear financial planning support, it becomes easier to see the bigger picture, make informed choices, and approach negotiations with confidence. Modelling, structured analysis, and future-focused thinking can also reduce conflict and minimise the risk of prolonged legal battles.

At Lamb Financial, we specialise in helping individuals navigate the financial complexities of divorce and separation. We work alongside family solicitors to provide practical, personalised advice that supports peace of mind, both during the divorce process and in the years that follow.

If you would like to discuss how financial planning can help you feel more secure and in control during and after divorce, contact us for a confidential conversation.

One of the first questions people ask when facing divorce or separation is: “How will our assets be divided?”

Uncertainty around finances can add significant stress at an already difficult time, particularly where property, savings, pensions, and long-term security are involved.

In the UK, there is no fixed formula for dividing assets in a divorce. Instead, settlements are based on fairness, needs, and future financial security. Understanding how this works, and what to expect, can help you approach negotiations with greater clarity and confidence.

How are assets split in a divorce in the UK?

In England and Wales, the courts aim to achieve a fair outcome, rather than automatically dividing assets equally. This is a key point that underpins many divorce financial settlements and often surprises separating couples.

When deciding how assets should be split, the court considers factors such as:

• The income, earning capacity, and financial resources of each person
• Housing needs, particularly where children are involved
• The standard of living enjoyed during the marriage
• The length of the marriage or civil partnership
• Contributions made by each party, both financial and non-financial
• Age, health, and future financial needs

This approach means that while a 50/50 split can be a starting point, it is not guaranteed, giving rise to what is often referred to as the 50/50 divorce myth.

What assets are taken into account?

A divorce financial settlement UK typically considers all assets owned by either or both parties, including those held individually.

Common assets include:

• The family home and any additional property
• Savings and cash deposits
• Investments, such as ISAs, shares, or investment portfolios
• Pensions, which are often among the most valuable assets
• Business interests
• Debts and liabilities

Full and honest financial disclosure is essential. Incomplete or inaccurate information can delay proceedings and lead to outcomes being challenged later.

How are houses divided in a divorce?

The family home is often the most significant asset, both financially and emotionally. How it is dealt with depends on individual circumstances rather than a standard rule.

Possible outcomes include:

• Selling the property and dividing the proceeds
• One party retaining the home, often offset against other assets
• A deferred sale, where the property is sold at a later date (for example, when children reach adulthood)

Key factors influencing the outcome include housing needs, affordability, mortgage capacity, and whether alternative assets are available.

While retaining the family home may feel like the safest option, it is important to consider longer-term affordability and the impact on future financial and retirement planning.

How are savings and investments divided?

Savings and investments are usually more straightforward to divide, but they still require careful consideration.

Key issues include:

• Whether assets are held jointly or individually
• Tax implications when assets are transferred or sold
• Ensuring both parties retain sufficient accessible funds

A settlement that looks balanced in headline terms may still create challenges if liquidity or tax efficiency is overlooked.

What about pensions?

Pensions are usually treated as matrimonial assets and form part of the overall financial settlement. However, they are dealt with differently from other assets due to their long-term nature.

Pensions can be divided through mechanisms such as Pension Sharing Orders or offset against other assets. Because of their complexity, pension division requires specialist analysis.
For a detailed explanation, see our guide on how pensions are split in divorce.

How is a financial settlement reached?

There are several routes to agreeing a financial settlement:

1. Negotiation between solicitors, supported by financial disclosure
2. Alternative Dispute Resolution (ADR), including mediation, private Financial Dispute Resolution (FDR), or arbitration
3. Court proceedings, where a judge determines the outcome

Regardless of how agreement is reached, a legally binding financial order is usually required to provide certainty and achieve a clean break.

Protecting yourself during asset division

Some practical steps can help protect your financial position:

• Gather full financial documentation early
• Understand the true value of all assets, including pensions
• Avoid informal or verbal agreements
• Consider future income and retirement needs, not just immediate outcomes

Financial planning input can be particularly valuable where trade-offs are being considered, such as property versus pensions.

Common misconceptions about dividing assets

Several myths frequently arise during divorce:

• Assets are always split 50/50
• The family home must be retained at all costs
• Pensions are less important than property
• Informal agreements are sufficient

In reality, each case is unique, and long-term financial security should guide decisions rather than assumptions.

How financial planning supports better outcomes

Financial planning plays a vital role in divorce by helping individuals:

• Understand how different settlement options affect future income
• Model outcomes using cashflow projections
• Make balanced, informed decisions under emotional pressure
• Reduce the need for excessive professional fees, as well as conflict by focusing on practical, evidence-based solutions

Clear financial insight can often help negotiations progress more smoothly and reduce the risk of prolonged disputes.

Final thoughts

Understanding how assets are split in a divorce is essential to achieving a fair and sustainable financial settlement. Asset division is not simply about dividing what exists today, but about ensuring both parties can meet their needs and remain financially secure in the future.

With the right financial planning support, it becomes easier to see the bigger picture, reduce uncertainty, and approach decisions with confidence. Clear analysis and forward-looking planning can also help minimise conflict and avoid unnecessarily prolonged legal battles.

At Lamb Financial, we specialise in helping individuals navigate the financial complexities of divorce and separation. We work alongside family solicitors to provide clear, practical advice that supports peace of mind, both during the divorce process and in the years that follow. If you would like to discuss how financial planning can help you feel more secure and in control during and after divorce, contact Lamb Financial for a confidential conversation.

When couples divorce or dissolve a civil partnership, attention often focuses on the family home, savings, and income. Yet for many people, pensions are among the most valuable assets in the divorce financial settlement and among the least understood.

How pensions are split in divorce can have a profound impact on long-term financial security, particularly in retirement. Getting it wrong can result in a settlement that looks fair today but creates a significant imbalance later in life.

In this blog, we’ll explain how pensions are treated in divorce in the UK, the main methods used to divide them, and why specialist financial planning is so important.

Why are pensions included in a divorce settlement?

In England and Wales, pensions are treated as matrimonial assets, even if they are held in just one person’s name. The reasoning is simple: pensions represent deferred income built up during the marriage or civil partnership.

In many cases, pensions can be worth as much as (or more than) the family home. Ignoring them can distort the overall settlement and leave one party financially vulnerable in retirement.

As part of a divorce financial settlement UK, courts aim to reach a fair outcome, considering needs, resources, and future income, not just current assets.

How are pensions valued in divorce?

Before pensions can be divided, they must be valued.

Most pensions are initially valued using a Cash Equivalent Transfer Value (CETV). This is provided by the pension scheme and represents the amount that could be transferred out to another pension arrangement.

Pension providers are usually required to provide one CETV, free of charge, every 12 months.

When CETVs are not enough

For some pensions, particularly final salary (defined benefit) schemes, CETVs can be misleading. These pensions provide a guaranteed income for life, often linked to inflation, and their true value may not be fully reflected in a transfer value.

In these cases, solicitors may recommend an actuarial valuation or advice from a Pension on Divorce Expert (PODE) to assess the pension more accurately.

The main ways pensions are split in divorce

There are three primary methods used when dividing pensions on divorce in the UK. Each has different implications for long-term financial planning.

1. Pension Sharing Orders

A Pension Sharing Order (PSO) is now the most common and generally preferred approach. It works by splitting the pension at the point of divorce. A percentage of one party’s pension is transferred into a pension in the other party’s name.

Key features:

• Each person ends up with their own pension
• There is a clean break between former spouses
• Future retirement income is independent

For example, if one spouse has a pension valued at £300,000, a 40% Pension Sharing Order would transfer £120,000 into a pension for the other spouse.

From a financial planning perspective, this approach provides clarity and flexibility, making it easier to plan for retirement.

2. Pension Offsetting

Pension offsetting involves one party keeping more of the pension while the other receives a greater share of non-pension assets, such as the family home or savings. This is often attractive emotionally, particularly where one person wants to keep the house, but it carries risks.

A common mistake is assuming “£1 in a pension is the same as £1 in property or cash.”

In reality:

• Pension funds are taxed differently
• Access is restricted until later life
• Investment growth and inflation matter

Without careful financial analysis, offsetting can lead to one party being asset-rich today but income-poor in retirement.

3. Pension Attachment Orders

A Pension Attachment Order (sometimes called earmarking) directs the pension scheme to pay a portion of retirement income or lump sums to an ex-spouse in the future. These are now relatively uncommon because:

• There is no clean break
• Payments depend on the member retiring
• Income can stop on remarriage or death

From a planning perspective, this approach creates uncertainty and ongoing financial dependency.

Is everything split 50/50?

One of the most persistent misconceptions in divorce is the “50/50 divorce myth.”

While equal division can be a starting point, UK divorce law focuses on fairness, not strict equality. The final outcome depends on factors such as:

• Housing and income needs
• Age and health
• Earning capacity
• Existing pension provision
• Responsibilities for children

This means pension sharing percentages vary widely. A fair outcome aims to balance future income and security, not just divide headline values.

How different pension types affect divorce outcomes

Not all pensions are treated the same in practice.

• Defined contribution pensions are usually easier to split and more transparent
• Final salary pensions often require specialist valuation
• Public sector pensions have specific scheme rules
• Self-Invested Personal Pensions (SIPPs) offer flexibility but still require court orders

Understanding how each type works is crucial when negotiating pension division.

Common mistakes when splitting pensions in divorce

Some of the most common issues we see include:

• Ignoring pensions entirely
• Relying solely on CETVs for complex schemes
• Offsetting pensions against property without proper analysis
• Focusing on short-term needs rather than retirement income
• Failing to secure a clean break

These mistakes often only become apparent years later, when retirement approaches.

How financial planning helps during divorce

Specialist financial planning brings structure and clarity to pension decisions during divorce.

This includes:

• Explaining what pension values actually mean in retirement terms
• Comparing pension sharing versus offsetting outcomes
• Using cashflow modelling to project future income
• Supporting solicitors with clear financial insight
• Helping clients regain a sense of control during an emotional process

Well-informed decisions can reduce conflict, speed up negotiations, and help avoid protracted legal battles.

Final thoughts

Understanding how pensions are split in divorce is essential to achieving a fair and lasting financial settlement. Pension decisions are rarely just technical; they shape long-term income, security, and independence in retirement.

With the right financial planning support, it becomes easier to understand your options, reduce uncertainty, and make decisions with confidence. Clear analysis and forward-looking planning can also help minimise conflict, keep discussions focused, and avoid unnecessarily prolonged legal battles.

At Lamb Financial, we specialise in helping individuals navigate the financial complexities of divorce and separation. We work alongside family solicitors to provide clear, practical advice that supports peace of mind, both during the divorce process and in the years that follow.

If you would like to discuss how financial planning can help you feel more secure and in control during and after divorce, contact Lamb Financial for a confidential conversation.

For everything you need to know about the impact of last month’s budget on your finances, download our FREE Budget guide.

The 20-page publication covers all the key announcements by the Chancellor and the changes her budget brings in.

It includes sections on changes to tax and savings regulations, such as a freeze on income tax thresholds, modifications to salary sacrifice schemes, and a reduction in the Cash ISA allowance.

The guide also features an ‘at a glance’ summary of the key measures on tax, NI, and benefits and their impact on single people, couples, families, and pensioners.

Download your copy here.

If you have any questions about how the Budget could impact your finances and would like some advice, contact us at enquiries@lambfinancial.co.uk or call 01661 860438.

By David Lamb CFP™ MCSI

This Spring marks our 32nd anniversary in business – and three decades in which I have seen many changes in the financial service industry.

These have mainly been in the transition to better quality of advice, achieved through more regulation and mandatory qualifications for advisers.

Unfortunately, the ‘industry’ is still not quite there yet and remains dominated by the product providers (banks, investment houses and life assurance companies) who constantly come up with reasons you should give them your money.

True financial planning is not about your money, but about how you can use your resources to support you and your family’s lifestyle without the fear of running out of money, whatever happens.

We pride ourselves in being at the forefront of the development of lifestyle financial planning; we are only one of 60 firms of financial planners in the country to be accredited by our professional body the Chartered Institute of Security and Investment.

I am a Certified Financial Planner, Affiliate of the Society of Trust and Estate Practitioners and a Chartered Wealth Manager, while my new colleague Peter Kenny is also highly qualified to Level 6 and will become chartered in the very near future.

I am not a big fan of the financial services ‘industry’ and have always tried to be different; a rebel with a cause if you like! Over the last few years in these monthly columns I have tried to explain what true lifestyle financial planning is, but there is a limit to what you can get across in 400 words.

This month we are therefore going to hold a FREE seminar, followed by a light buffet, to share with you a few trade secrets the financial services industry does not want you to know (which you won’t find by Googling) and what true financial planning is all about.

The event is being held at 6pm on Monday May 20 in the Bishop Merton Room at St Mary’s Parish Centre on Thornhill Road.

If you would like to join us, please reserve your place by emailing laura.fairley@lambfinancial.co.uk or calling 01661 860438. But you will need to be quick – places are strictly limited to 20 attendees.

Hopefully, at the end of the seminar, we’ll all be rebels with applause!

By David Lamb CFP™ MCSI

In January I wrote about a lovely client who made some very generous donations to Glenmore Lodge and Cairngorm Mountain Rescue.

Louie’s gifts, in memory of her late husband Norman, funded a course teaching children mountain skills at the outdoor training centre near Aviemore and a hi tech thermal imaging drone to support search and rescue operations.

The beneficiaries were chosen because Speyside in Scotland was one of the couple’s favourite holiday destinations.

At the end of January, whilst driving home from work listening to the news, I learned that a monkey had escaped from the Highland Wildlife Park in Kincraig and Cairngorm Mountain Rescue were helping with the hunt for the marauding mammal using their new drone.

The search for the Japanese macaque, nicknamed Kingussie Kong after a local town, had made national news. When the monkey was eventually recaptured following four days on the run after being tracked by the drone, it looked rather hungry and feeling sorry for itself. But its life had probably been saved by the airborne tracker that Louie’s money bought.

When done properly, financial planning can have a major impact on clients’ lives and a knock-on effect in other areas. Who would have thought that asking a client how she wanted to use her money could result in a few days of fun following the national news?

I get a lot of job satisfaction helping clients plan and achieve their desired lifestyle. But having a small part in an event that made national news and knowing that the drone which Louie had generously funded with our help will one day save a human life is especially heartwarming.

By David Lamb CFP™ MCSI

The loss of a life partner is one of the most traumatic experiences we can have. But out of the resulting grief can emerge a lasting legacy, as our latest client case study shows.

With no children or close relatives, Louie and husband Norman were absolutely devoted to each other and did everything together.

One of their favourite holiday destinations was Speyside in Scotland, but three years after Norman passed away Louie had still not returned to the area – saying it would be just too painful to visit.

Financial planning projections showed Louie was financially secure, and her plan was to bequeath donations to Dogs Trust and other charities in her will.

We suggested to Louie that the charities could have a long wait and she may enjoy seeing the beneficiaries of her wealth by making donations now – an idea she loved. As this was also Norman’s money, we asked what he would have wanted.

He was very keen on rugby and hill walking and Louie felt sure that he would have liked to support his local rugby club and also to help to get underprivileged children out of the city and into his beloved mountains.

She emailed the secretary of Norman’s first rugby club, while we contacted Glenmore Lodge, one of the country’s leading outward-bound centres.

We also suggested to Louie that, if we were going to help kids get into the mountains, we should also think about getting them down – so we also contacted Cairngorm Mountain Rescue.

After discussions Louie decided to fund a minibus for the rugby club and an expensive drone for the Mountain Rescue team. Glenmore Lodge are also developing a course, to run over 10 years, to train children in mountain skills, which will be in Norman’s name, with a plaque dedicated to him at the lodge.

The donations left a lasting legacy for Norman which gave Louie a huge morale boost and she is following the students’ progress with a keen interest.

Model your financial future with our free online tool at lambfinancial.co.uk.

By David Lamb CFP™ MCSI

Our last blog focused on value for money and how there is a lot more to financial planning than investment returns. When it’s done right, it can be truly life-changing – as the client case studies we will share over the next few blogs will demonstrate.

Our first is Bob and Maureen. Recently retired, they were relieved when our comprehensive, stress tested financial plan showed they were never going to run out of money.

We then explained to them that there were actually some serious challenges of being what we call a ‘got too much’ client. Tax being one of them.

Surely they’ve already paid enough tax when they were working and running their business; now we pointed out that inheritance tax would probably be their biggest tax bill ever. We reminded them that it’s no use being the richest man or woman in the graveyard.

We asked Bob and Maureen how much they wanted to leave behind and Bob said that he didn’t want to payany inheritance tax, which at the time meant leaving no more than £650,000.

A further calculation showed that they could do this and also easily spend an extra £30,000 each year, in today’s terms, for the next ten years.

That was the good news. But in the initial factfinding we do with all new clients, when we ask them to score themselves against ten key life satisfaction areas, Bob and Maureen came out low on fun, recreation and fulfilment.

We had already identified low spending on holidays but further discussions uncovered Maureen had a fear of flying which was becoming a real problem.

So we sent Bob details of a flying phobia course at Newcastle Airport and, three months after Maureen completed it, we received a surprise postcard of an orangutan. They were in Borneo! Now seasoned globetrotters, they send us a lovely hamper every Christmas in gratitude. 

Photos of the orangutan take pride of place on our clients’ ‘bucket list’ wall in our office – along with pictures of campervans, the Northern Lights and other wonderful reminders from clients of how we are changing their lives for the better.

Next blog – how we helped a widow leave a lasting legacy for her beloved husband. Model your financial future with our free online tool at https://lambfinancial.truthaboutmoney.co.uk/

By David Lamb CFP™ MCSI

One of my major issues with the investment industry is its high charges.

They are often difficult to understand and are frequently hidden – or ignored – due to ‘good’ returns. Just because your money is ‘growing’, doesn’t mean you’re getting value for money.

Charges often include a product fee – charged by the company who provides you with the investment vehicle, a fund charge – made by the fund manager, and an advice fee – payable to your adviser.  

These can be as high as 2% but are often around 1.8%. We aim to get our clients charges to as close to 1% as possible – and sometimes slightly lower.

Remember, the higher the charges the less you have invested. The less you have invested, the less there is to grow. Most importantly, when somebody claims that their charges are high because they give better value for money or provide superior performance, remember that while charges are guaranteed, returns are not.

Here is an interesting exercise for you. Ask your adviser for your fund’s annual returns over the last five years (or Google search your fund’s fact sheets). Calculate the average growth over those five years, then take off the total annual charges. What is your growth after charges?  

For example, average growth over five years of 4% less charges of 1.5% means growth after charges of 2.5%.

Unfortunately though, this isn’t your real growth; you then need to deduct the effects of inflation.

We are currently assuming inflation over the longer term to be 3.25%, but you can make your own assumptions by using data from the Office for National Statistics available at ons.gov.uk. Deduct this from your growth.

Continuing our example, growth after charges is 2.5% less inflation of 3.25% = – 0.75%.

What are your net returns? Is this value for money? Who is making the most from your money? Who is taking the risk – the product provider, the fund manager or adviser?  Whose money is being invested?

Of course, as I’ve explained in earlier articles, there is a lot more to financial planning than investment returns. Are you really getting value for money from the fees you pay?

Self-assess your progress in your financial planning, for free, at:

lambfinancial.co.uk/scoremy-financial-planning.

By David Lamb CFP™ MCSI

My last work meeting before leaving for Rome to see a Bruce Springsteen concert early this summer was an investment risk analysis with a new client.

During the discussion I asked him his views on the investment industry. He responded that he thought it was a necessary evil and considered it a very manipulative boys’ club. Ouch!

A couple of days later I heard Bruce sing: “We learned more from a three-minute record than we ever learned in school.”

The Boss also wrote:

Gambling man rolls the dice

Working man pays the bill

It’s still fat and easy on banker’s hill

On banker’s hill the party’s going strong

Down here below we’re shackled and drawn.

With this reputation, perhaps the investment industry could learn a lot from a three-minute record. No wonder people are wary of financial advisers if they seem to be an old boys’ club, only interested in wanting to invest your money at no risk to them!

A good financial planner will be different because they should focus on you, your family and your lifestyle – not your money.

Many of our clients initially come to us thinking they need advice on a product (a pension or investment), but after we have explained what true financial planning is they understand that what they really want is to know how much is enough? Enough to give them the lifestyle that they want without the fear of running out of money, whatever happens.

Many think this is the big question. We think it is the second biggest question. The big question is enough for what? What is your lifestyle now and what do you want it to be in the future? The planner should then work with the client to achieve this lifestyle, using the resources that the client has available.

Have you thought about what your lifestyle looks like through the different phases of your life and how much will be ‘enough’ to fund it?

There are free resources on our website that can help you do this anonymously, including a tool to help you understand your current lifestyle and a questionnaire to help determine where you feel you are with your financial planning.

You may find the results interesting.

Visit lambfinancial.co.uk – scan the QR code for speed.

By David Lamb CFP™ MCSI 

I ended my last blog by saying you could sit back and relax for 12 months on completion of the implementation stage of your financial plan. After this first year the next stage is your initial review.

A financial plan is always work in progress and one of the worst things a financial planner can do for their clients is not to provide regular reviews.

Nowadays, most cars have a satnav, which constantly reviews your progress towards your destination. If you take a wrong turn, it will warn you and advise you how to get back to your planned route.

Your financial review is your ’moneynav’ and should include:

• Your objectives – What have you achieved? Are there any new objectives we need to plan for?
• Current position – What has changed since the last version of the plan? Income, expenditure assets and liabilities statements should be updated.
• Investments – Are adjustments to take into consideration revised objectives? If still accumulating wealth, are the investments on target to achieve ’Enough’? If decumulating, and you are never going to run out of money, how are the investments performing against inflation? For both scenarios, do we need to make some amendments? Different asset classes perform in different ways; does your portfolio still match your investment risk profile? If not, we may need to rebalance to the ‘shape’ of your original portfolio (all our clients are automatically rebalanced once a year, at no charge).
• Estate planning – Have there been changes within your family, or with legislation that we need to consider?
• Assumptions – Do these need adjusting to adapt to your changing circumstances or the economic environment? At present, inflation springs to mind!
• Taxation and legislation – Are there any changes that we need to consider? Recent changes to capital gains tax and pensions have made some clients change their strategy.

Your review is not just about looking back, it’s also about planning going forward; what are you going to do next?

In some instances, there may be significant changes where a completely new financial plan may be required. But usually the existing plan can be updated and amended.

My favourite part of the review is catching up with the progress of our client’s bucket lists.  We have some lovely photos in our office from clients who have been ticking off their lists, including watching orangutans in Borneo, Route 66 on a Harley Davidson, wild camping and the results of some fantastic charitable donations.

Just remember though, financial planning is like exercise; you can’t go to the gym once and be fit for life, you must keep going!

By David Lamb CFP™ MCSI 

In my last blog I explained why cashflow modelling should be at the core of a professionally structured financial plan. On completion of the plan, the next stage is implementation.

At this point in the process you may need to build a good team of experienced professional advisers around you, not just your financial planner.

Most financial plans are likely to include estate planning. I would strongly recommend a specialist solicitor above all others who may write wills, because they are more likely to have the experience to draft the will for complex finances or family structures.

Don’t just give them instructions – a good estate planner should be asking similar questions to your financial planner about your family, relationships, wealth etc and be prepared to work alongside your financial planner.

For those with businesses or complex tax issues, you may need to include an accountant as part of the team of advisers. We often suggest that the business should be seen as a financial asset that can either be sold at retirement or generate extra income that can be invested to provide an income in retirement. The accountant can therefore support this kind of planning.

In some cases, we have brought in business coaches to provide extra support.

An issue we sometimes see with clients who should be decumulating their wealth is how they find it very difficult to change a lifetime habit of accumulating, even though they know they should be spending or gifting their money.

In most cases cashflow modelling will provide this confidence to change, but sometimes a life coach may help to overcome any mental blocks.

When it comes to the financial advice part of the implementation, usually involving pensions and investments, products should already have been built into the plan. However, you need to be aware of the effects of the costs of establishing that product.

What are the initial costs for setting up a new product?

What impact will these have on the growth of the funds?

What of the ongoing fees?

What are the net returns expected after all charges and inflation after the anticipated growth rates? Refer to the adviser’s assumptions document. Do these charges provide value for money?

Once the implementation of the plan is complete, you can sit back and relax for 12 months before your review is due. One of the biggest disservices a financial planner (or adviser) can do for their client is to fail to carry out a review.

More on this in my next blog.

By David Lamb CFP™ MCSI 

In my job I use lots of different tools, from compound interest rate calculators to investment risk analysis systems.

But the one piece of equipment I would really like is a crystal ball. To see into my client’s futures would be invaluable. Unfortunately, despite years of searching, I can’t find one that works anywhere!

The next best thing to a crystal ball is cashflow modelling, because with reasonable and robust assumptions they can tell you so much about a client’s financial future and, therefore, the impact on their lifestyle. 

Cashflow modelling should be at the core of a professionally structured financial plan.

Just about every financial decision you are ever likely to make will have an impact on your cashflow projections and I don’t think you should buy an investment or protection policy without understanding how that product will benefit your projections.

Building a detailed cashflow model can be time consuming but the benefits are huge and, combined with a bit of lifestyle planning, can change lives.

Cashflow modelling can tell you so much, for example:

• How much is enough to give you the lifestyle you want, without the fear of running out of money, whatever happens.
• When you can retire and stop doing the things you don’t want to do and start doing the things you do want to do.
• How much you will leave on your death and how much you need to leave. Consideration can then be given to how much you want to leave and the implications if these numbers are different. It may be that younger people with families need to think about contingency plans, such as life assurance. Older people, who may be leaving too much, can ask if they can spend more (think bucket lists!) or give money away during their lifetime, not when they die.
• How much money you will need at different stages of your life.
• How much risk you need to take with your investments. If you are never going to run out of money, you do not need to take unnecessary risks to get more!
• Whether you need to worry about money, or not.

Helping clients see into their financial future can have a massive positive impact on their lives, but it is essential that these projections are reviewed on a regular basis.

Build your own cashflow model at lambfinancial.truthaboutmoney.co.uk.

By David Lamb CFP™ MCSI 

In recent blogs I’ve detailed the data needed to complete a financial plan and the importance of assumptions.  

Now we get to the structure of the financial plan itself. The plan is not a static document and should evolve as the client’s life changes. 

It could be relatively simple or quite comprehensive, depending upon the client’s requirements. Either way, it should be easily understandable. 

The plan itself may not involve the use of financial products (we are financial planning, not providing financial advice at this stage). 

The structure, as recommended by the Chartered Institute of Securities & Investment should include:  

• Objectives and priorities – a statement of what the client wants to achieve and when. 
• Assumptions – this would usually be a summary of the main assumptions.  
• Current position – this will include detailed statements for assets and liabilities as well as net worth, income and expenditure, net spendable income, tax calculations, such as income and inheritance tax. This information will then be used to produce cash flow statements which will then show you where you are heading financially if you do not do anything. A comprehensive plan will also include projections in catastrophe scenarios.  
• Action plan – this will be where the planning actions are detailed. Again, these can be very simple or extremely detailed. I prefer to keep this section as simple as possible, going into greater depth in a separate document, if required. The format should include the specific action, the reasons for the recommendation and who will be responsible for carrying out the action (this may include the client, the financial planner, their solicitor or accountant) and timescales for completion. As part of the action plan, the cash flow projections should be updated to show the effects of the plan on the clients projected financial future.  
• Arrangement for review – a financial plan must be an evolving document, so it is essential to have regular reviews.  

We often meet new clients who think they’ve been receiving financial planning but have never seen a financial plan. In reality, they have only been receiving financial advice.  

However, without a plan it will be very difficult to understand the consequences and benefits of financial advice and, unfortunately, that is where things can go wrong. 

A financial plan should be the centre of an ongoing, structured professional process and at the centre of a financial plan should be cashflow projections. More on that in my next blog. 

By David Lamb CFP™ MCSI

A pilot wouldn’t dream of taking off without a flight plan and a properly qualified financial adviser shouldn’t provide advice without a properly constructed financial plan.

In the ideal world, a financial plan would be built using a crystal ball. Unfortunately, we do not live in an ideal world, so a financial plan needs to be based round cashflow projections, to give you a glimpse into your financial future. I’ll go into more depth on cash flow modelling later in this series of blogs.

Like all projections we need to make assumptions. These include:

• life expectancy
• inflation (rates for prices, earnings, house prices etc may differ)
• investment returns for different asset classes (which will then help in providing projected returns according to your own investment risk profile)
• changing spending patterns at different stages of your life (ideally you will probably want to spend more during the ‘active retirement’ phase of your life on holidays, fun and recreation etc than you will during the ‘traditional retirement’ phase, when you normally spend less because you are slowing down)
• the cost – and length of stay – of long term care.

These assumptions must be both reasoned and reasonable – and it is essential that your planner agrees these with you before looking at your cash flow projections.

If you don’t have confidence in the assumptions, it follows that you will not have confidence in the outcomes. If you are not confident in the outcomes, your plan will be meaningless, you all have wasted both your time and money and your financial future will remain uncertain.

At your first meeting with your prospective financial planner, ask to see their Assumptions Document. Do you understand them and are you happy to accept them? Don’t be afraid to ask to see their research to confirm those assumptions are reasoned and reasonable.

Of course, there is only one thing you can guarantee about assumptions…they will be wrong!

Changes in your career, lifestyle and the economy all affect your cashflow projections. So like the pilot with his flight plan who will constantly have to adjust to ensure he arrives at the correct destination, your financial planner must constantly review the assumptions and revise the projections, which is why regular planning reviews are essential.

Once we have the data and have agreed with the assumptions, we look at what we can do with this information. More on that in our next blog.

By David Lamb CFP™ MCSI

Once you have settled on a financial planner you feel comfortable with and are confident that they can provide value for money, the next stage of the process is data gathering.

For most people, the main aim of financial planning is to achieve and maintain their desired lifestyle, without the fear of running out of money, whatever happens. The purpose of data gathering (or fact finding) is to help you and your planner understand what resources you have available to support your aims and objectives.

The easiest data to gather is the quantitative data, (the facts) which will include income and expenditure, assets and liabilities, along with details of your will, if you have one. Family details are essential.

To save time it is usually easier to give your planner account numbers for all your financial products. They can then provide you with a letter of authority to allow the providers (investment or insurance companies) to give them all the information they require.  Mortgage providers are likely to charge for this, so best dig out your latest mortgage statement.

Contact details for other advisers such as your accountant and solicitor are helpful because your planner may need to work as a team with fellow professional advisers when tax or estate planning.

These quantitative hard facts are essential but qualitative, soft data is also vital to help you achieve your aims and objectives. This information is usually best discovered in a conversation with you.

This could include questions to help your adviser understand your current and desired lifestyles, your expectations for retirement and plans for your family such as funding children’s weddings and house deposits.

It is not uncommon for clients to have given little thought to these questions and therefore to not have a clear vision of what they want.

With more than 30 years as a financial adviser my experience suggests that many clients don’t know what they want, but they do know what they don’t want, which is anything less than they have now.

We have some free resources on our website at lambfinancial.co.uk which ask you questions you may not realise you need to know the answers to – and to help you quantify your lifestyle and identify areas for improvement.

Once this data has been collated and analysed your planner can then build cashflow projections based on your current position, showing where you are heading without any planning.

They should also compile what is basically a set of accounts, detailing your income, expenditure, assets and liabilities, along with inheritance tax calculations. Before they do all this though, you all need to understand and agree the assumptions made in these calculations.

More on this in our next blog.

By David Lamb CFP™ MCSI

The cost of the service is an important factor when deciding to work with a financial planner, but equally important is to understand the value that the planner provides.

Obviously financial planners need to be paid for their service, not just to earn a living or cover their business expenses but to cover the liability they take on when they provide financial advice.

Traditionally the cost of financial advice was met by a commission on the sale of a financial product, creating an incentive for a financial ‘adviser’ to sell a financial product. Since 2012, the cost of advice has usually been covered by an ‘adviser fee’ paid from a financial product.

But genuine financial planning should not dependent upon the sale of a product; you should be prepared to pay a separate fee for professional services.

In your initial meeting with your prospective financial planner, spend time getting to understand their fee structure. Do they charge by the hour, one overall fixed fee or a series of fixed fees as you progress along the process? What is right for you?

If the fee is to be paid from a financial product, the ‘planner’ will be relying on selling a product. At this point, it is probably best to end the meeting and look for somebody else.

Once the financial plan is complete, you may require financial advice and it is important to understand how you will pay for this. Will you be invoiced or will the fees be deducted from the recommended product? If the fees are deducted you need to understand, not only how much they are, but the effect on your investment these fees could have.

What rate of return does the planner expect to achieve for your investments (the research should not be based upon past performance)? Consider these returns then deduct all fees. Is this value for money?

If the fees are based on percentages and are to be deducted from the product, consider if you would write a cheque separately for this advice. If not, look for another financial planner.

What are the charges for ongoing advice? Are they solely taken from the product? If so, this could cause a conflict of interests because the adviser may not want you to spend your

money. Again, you may want to look to look elsewhere.

Ask the adviser how they will measure the value of their service. Can they provide specific benchmarks to help you achieve your objectives and your desired lifestyle? If not, the search for a good financial planner continues.

By David Lamb CFP™ MCSI

Well, I didn’t see that coming!

Chancellor Jeremy Hunt has abolished the pensions lifetime allowance and increased the annual allowance by 50% to £60,000.

The lifetime allowance (LTA) is the maximum amount you can have in pension funds before paying tax. The current limit is £1,073,100. If this is exceeded, tax of 55% is paid on a lump sum and 25% on income (from the pension).

The annual allowance (AA) is the limit that can be paid into a pension in any one tax year – currently £40,000 – whilst still qualifying for tax relief. Any payments above this will be added to your income and you will be subject to tax at your marginal rate.

If your income exceeds £200,000 your AA will gradually taper to as low as £4,000, meaning any contribution above this will be taxable.

Many people may think these are large amounts of money, a nice problem to have and it doesn’t affect me, but indirectly it may.

Having a few clients who are employed by the NHS, I see how they are penalised for working so hard.

The NHS pension is a defined benefit scheme, which means that the benefits are calculated as a proportion of salary. To provide this guaranteed pension costs a lot of money, often in excess of the current £1,073,000 LTA. 

This means that the longer an NHS employee works, the more tax they will pay in retirement on top of normal income tax. This acts as a bit of a disincentive to work to normal retirement age, which is why a survey by the British Medical Association found that almost half of all consultants were planning to leave, or take a break, over the next 12 months.

But it gets worse when the AA is also considered.

These are expensive to fund and, as so many senior medics are well paid, they exceed their AA and are taxed immediately on this benefit, resulting in a double disincentive.

More and more NHS workers, already feeling stressed, are retiring early or working part-time and this is where everyone is affected; longer NHS waiting lists and making it extremely difficult to see your GP.

Hopefully these changes will encourage doctors to take on extra work to reduce waiting lists without being heavily penalised.

Expert predictions suggested that the LTA was going to rise to £1.8m which, according to leading wealth management provider Quilter, could result in a benefit to a pension scheme holder who has a fund of £1.8m of around £181,725 due to saved tax.

Mr Hunt has gone way beyond this.

So, that’s some good news. Tomorrow, I suspect, will be when we start to learn how today’s budget will hurt us….

By David Lamb CFP™ MCSI

Significant changes are being introduced in April to Capital Gains Tax which reduce the exempt amount but increase the timescales for asset transfer.

Capital Gains Tax (CGT) is a tax on profits when you dispose of an asset, either by sale or transfer. 

There are no liabilities for transfers between spouses but when the transferee disposes of the asset, they will be liable for the whole gain.

Those going through a divorce, or dissolution of a civil partnership are also able to benefit from this principle up to the end of the tax year when they separated, or until decree absolute, whichever comes first.

Unfortunately, this often causes problems.

When a relationship breaks down one spouse will usually move out of the family home, in which case HMRC no longer treats this property as their main residence, and a clock starts ticking…

If the matrimonial home is to be sold, the spouse who has moved out has until the end of the tax year for the property to be sold. After this, they will subject to CGT on any gains made on the value of the property. This problem is exasperated if they split late in the tax year, reducing the window of opportunity to save CGT.

This provides the partner remaining in the home with an unfair opportunity. The longer it takes to sell the home, the more their ex-spouse has an exposure to potential CGT. They don’t. The cynic in me would be concerned about ex-spouses prolonging the sales process of the matrimonial home to financially penalise their former husband/wife.

Currently an individual can make a gain of £12,300 before being liable for capital gains tax, which is then charged at 10% for basic rate taxpayers and 20% for those liable for higher rates. If the chargeable gain is on residential property (but not your main residence) the rates are 18% and 28% respectively. For the spouse who moves out the house will cease to be their usual residence, therefore the 18% and 28% rates apply.

From April 2023, the annual exempt amount will reduce from £12,300 to £6,000 meaning that the gain will be smaller before a tax liability arises. The following year, it gets worse again, because the £6,000 will be halved to £3,000.

But there is good news!

From 6 April 2023, divorcing spouses will have three years from the year they stopped living together to make the transfer on a no gain/loss basis. 

And if the assets are transferred as part of a formal divorce or civil partnership agreement, the timescales become open ended; the three-year limit does not apply.

The new rules will also apply to Mesher orders, meaning that spouses who are entitled to receive a share of the proceeds of the sale of the matrimonial home will benefit on a deferred basis.

Please be aware that these new rules only apply on transfers made after 6 April 2023.

When assisting clients with estate planning, I often recommend that cohabiting couples marry because this can be very advantageous to reduce inheritance tax (married couples can inherit their spouses’ assets and even their nil rate band and residential nil rate band). Not very romantic, but very tax efficient and most people are keen to save tax!

The same cannot be said when advising on divorce. It is very hard to recommend separating couples to remain under one roof until the house is sold to avoid CGT. There are limits as to how far people will go to avoid tax!

But at least when it comes to divorce – a hugely stressful time – the capital gains tax clock won’t be ticking as loudly, or at all.

By David Lamb CFP™ MCSI

If you have decided you want to enlist the services of a lifestyle financial planner, what should you expect from your initial consultation?

The first meeting should be an exploratory session where you and the financial planner get to know each other to determine if they can help you and you can work together. This should be at the planner’s expense; do not pay for this meeting!

If you are a couple you should both attend the meeting (it should be a joint plan for a joint lifestyle) and hold it in the planner’s office. Whether you find it tidy and functional or cluttered and chaotic could give you a fair indication of the standard of service you would expect to receive.

Being issued with an agenda confirming the date, time and location and providing a proposed structure of the meeting would also indicate an efficient and organised planner. Prepare by thinking about what you want to achieve from the meeting and any specific questions you want to ask.

The planner should first explain how they work (the regulatory issues and their processes) and want to know about you, your family, your employment, your lifestyle and your objectives.

They will also ask you a little bit about your financial background, but if they ask too many questions about your money at this first meeting, this could mean that they are more interested in your money than you and want to sell you a financial product. If they do, you should probably look for another financial planner.

Once the planner has discovered a little bit about you, you should find out more about them; ask about their qualifications and experience and what type of clients they have. Are they similar to you?

Ask detailed questions about their processes. Do they use cash flow modelling? What are their fees and how do they measure the value of their service?

Financial planning is usually a long-term process, so working with your financial planner is going to be a long-term relationship. The planner needs to be able to get to know you, your family, your lifestyle, and – later – your money in detail.

Are you comfortable with this? Do you like and trust them? If not, you should look for another financial planner. But if you are happy, you are probably ready to go to the next stage – providing all the relevant data to produce a detailed financial plan.

Next blog: finding out about fees and how the value of service is measured.

By David Lamb CFP™ MCSI

I have seen the name given to people who give advice or sell financial products change many times in the 38 years I have worked in the financial services sector.

Common examples include insurance agent, financial consultant, broker, financial adviser and wealth manager. The latest favoured term seems to be financial planner.

Unfortunately, many ‘financial planners’ are just financial advisers. Financial planner may sound better but there is a big difference between planning and financial advice – and not just in the qualifications.

Financial advice is the recommendation of a financial transaction at a fixed point in time – the selling or, or helping to buy, a product – whereas financial planning is an evolving action plan, resulting from a cyclical process.

Financial planning may involve financial advice (although not necessarily from the financial planner) but it does not need to involve product recommendations. A financial plan may, or may not, involve providing regulated financial advice.

Most importantly, clients do not need to be asset rich or earn high incomes to require financial planning.

In this new series of articles for 2023, I am going to describe the financial planning process – as detailed by my professional body the Chartered Institute for Securities and Investment and recommended for a Certified Financial Planner.

Qualifying as a Certified Financial Planner (CFP™) requires years of experience and the completion of a difficult and stringent process including standardised exams and a demonstration of ethics.  The most important aspect quality of a CFP™ is that they have a fiduciary duty, meaning they must make decisions with their client’s best interests in mind.

Future articles will include: what you should expect from a first meeting with a financial planner; the data required for a detailed financial plan and determining objectives; the importance of assumptions; the structure of a financial plan; why cash flow modelling is essential in financial planning; how the plan may be implemented; and why regular reviews are essential.

My experience shows that financial planning works well if it is done with clients as opposed to for them, but it works best if clients do their own financial planning and I just facilitate the meeting, use my professional knowledge when required and produce a structured financial plan.

Next blog: what you should expect from a first meeting with a financial planner – and what to be wary of.

Ouch! That’s stung a bit…

Yesterday’s Autumn Statement came at a time of significant economic challenge for the whole world.

We are currently facing a war in Ukraine contributing to a surge in energy prices, increasing global inflation and central banks raising interest rates to control inflation – which increases the cost of borrowing and therefore slowing growth. 

This is after higher levels of Government debt due to the impacts of Covid-19; UK Government debt spending is now expected to reach a record of £120.4bn this year.

A raft of tax increases is therefore not unexpected. They include:

• Road tax on electric cars from 2025
• Increased Council Tax
• 45% income tax threshold reduced to £125,000
• Personal allowances and reliefs frozen until 2028
• Capital Gains Tax threshold reduced from £12,300 to £3,000 in 2024
• Dividend Allowance reduced from £2,000 to £500 in 2024.

The last two measures will hit small investors particularly hard and care may be needed when doing a Bed and ISA (transferring money from taxable unit trusts to the same funds within a tax-free ISA wrapper).

So how much will these changes to income tax affect net incomes? This graphic shows how much worse off people earning up to £100,000 will be.

Whilst having less in our pockets is disappointing, the above figures show that The Autumn Statement will not have a disastrous impact on most people’s lifestyle.

The current rate of inflation is 11.1%, but the Bank of England expects this to fall sharply in 2023 due to the price of energy not rising so quickly. The BofE does not expect the price of imported goods to rise so fast and there will be less demand for goods and services.

A sharp fall in inflation is good news, but a key cause being reduced demand for goods and services is slightly worrying. Is this due to the Government forecasting higher unemployment? This would be the quickest way to reduce inflation, but quite brutal.

Key questions you need to ask yourself: how can you prepare for the next couple of difficult years, how will this affect your budget in the short term and what will the longer-term effects on your lifestyle be?

An emergency fund is essential. I would recommend that this is between at least three and six-months’ salary.

The next thing to do is a detailed expenditure analysis. This will ensure that you are in control of your spending and help identify areas where you currently spend money you could avoid.

If you earn £50,000 a year and can stop spending £572 on avoidable expenditure, you have just saved the amount the Government has picked out of your pocket.

How will the current situation affect your longer-term lifestyle? To analyse this, you need to create cash flow projections. These will tell you the truth about your money. You can build simple cash flow projections for free at:

https://lambfinancial.truthaboutmoney.co.uk/

By David Lamb CFP™ MCSI

English philosopher and statesman Sir Francis Bacon famously once said ‘Money is like manure, of very little use except it be spread’.

And how you ‘spread’ the risk of your investment portfolio is crucial if it is to be of future use.

Historically, stock market investments provide good longer-term returns but as most people are aware investing in shares does have its risks.

To reduce these risks, measured by volatility, investment portfolios will not just put money into the stock market but will consider other assets such as cash, fixed interest securities (bonds) and property, depending upon the target level of risk of the portfolio.

The lower the risk, the more will be invested in cash and fixed interest securities. The higher the risk, the greater the weighting in equities.

Another aim of investing in a range of asset classes is to achieve negative correlation between these investments. When one asset class falls out of favour, another will attract investments (the money must go somewhere!)

To understand the benefits of negative correlation, let’s assume that last August when temperatures were very hot you decided to invest in ice cream. The sales pattern of ice cream will be high in the summer but low in the winter.

You do not want to have all your eggs in one basket, so you decide to spread the risk by investing in something else, suncream. The problem with this is that both commodities will sell in a similar way throughout the year.

If you invested in Wellington boots, when sales are likely to be higher the winter and lower in the summer, you will achieve negative correlation with your ice cream.

If the equity market falls, often investors will expect money to flow out of the stock market and into fixed interest securities because they are usually lower risk and returns would normally be expected to be higher than putting the money in the bank.

Therefore, funds such as Vanguard and BlackRock that offer asset allocations of 40% fixed interest and 60% equities have been so successful; they also have very competitive charges.

But we live in strange times!

The following chart shows the correlation between the US stock market and US bonds between 1926 and 2022. In almost 100 years, there have only been three years when both asset classes have provided negative returns – the last more than 50 years ago.

While the current market turmoil is extremely rare it is therefore not unique.

This year we have experienced inflation hitting a 40-year high, governments reversing monetary policy, the ongoing pandemic, the supply chain problems caused by the COVID lockdown in China and Russia’s invasion of Ukraine, which of all 26 wars in Europe since 1945 has had the biggest impact on world economies.

It is likely that we will continue to suffer this economic pain for some time, but eventually we will come out the other side and things will improve.

In the meantime don’t panic and if you have any concerns about your investment portfolio please do not hesitate to contact us at enquiries@lambfinancial.co.uk or by calling 01661 860438.  Hopefully, we can provide some reassurance.

By David Lamb CFP™ MCSI

Amid the ongoing political financial crisis, turn on the news and it’s all doom and gloom for investments.

Almost daily it seems that we are being told that gilt yields are rising and that it is bad news. But why is that? How do gilts operate?

In this blog I will explain very basically how fixed interest investments work.

Suppose two years ago, the Government needed borrow £100 and you agree to lend them the money for a fixed rate of interest of £2 each year for 10 years, and at the end of that term the loan will be repaid. This £2 is known as the coupon rate.

This is a good investment for you because two years ago you would have struggled to get an interest rate from a bank or building society as high as 1% and, after 10 years, the loan will be repaid if the borrower is still around.

As it is the UK Government, I think we can be pretty sure that the borrower will be there to repay the money.

So what is the risk?

Let’s assume that you need to get your money back today, so you go to the Government and ask for your £100 back. Unfortunately, the Government will respond saying that they are not due to repay the money for another eight years, so come back then and you can have your money.

Because you really need your capital returned, you go elsewhere to try and sell the bond. You go next door and offer it to your neighbour and say ‘give me £100 and you will get £2 every year and in eight years’ time, you will get your £100 back from the Government’.

Unfortunately, your neighbour responds saying that he can now get 4% on money in the bank but (because he knows you really need the cash) he offers you £50 for the bond on the basis that you are getting some of your money back and he is still getting his 4% interest.

This is the main risk with fixed interest investments. The amount payable is fixed but if interest rates go up, the capital value will fall.

Now let’s assume that you need the money after nine years. The Government will still tell you to come back at the end of the 10-year period.

So you again approach your neighbour, who points out that interest rates are still 4% and offers you £50, but you now say ‘okay interest rates are 4% but you will get back £100 in a year’s time. You give me £90 and over the next 12 months you will get £2 interest and an increase on your investment of £10’. That is a return of £12. This is the yield.

So when we hear in the news that fixed interest yields are increasing, this is because the capital value is reducing.

Added into this, we need to consider risk; the risk of the capital not being repaid. The bigger the risk, the bigger the return you would expect.

One of the causes of fixed interest yields increasing is because there is concern that the Government is borrowing too much money and therefore the risk of default increases.

As we have seen the coupon stays the same, so to increase the interest rates the capital value will fall to reflect the higher risk.

The good news is that the credit rating agencies, whilst suggesting a negative outlook, are still rating the UK as AA (the best is AAA). Whether the rating is AAA or AA, what really matters is being patient – things are most likely to improve.

Should you be currently avoiding investments that hold fixed interest?

Stick to the principle that the best time to buy an asset is below its longer-term intrinsic value which will ultimately lead to satisfactory returns. Whilst this is a philosophy that is simple to understand, it can be difficult to execute for a lot of investors.

What should you do if your investments currently hold fixed interest funds?

When we are analysing our client’s attitude to investment risk, we ask them how they would react if their investments fell by a relatively large amount. Most wouldn’t panic and they would remain patient and wait for their investments to return to higher levels.

Now is that time. Be patient; things will get better. 

The Bank of England is still predicting inflation will be closer to its 2% target in 2024. Interest rates will fall, so will yields and the capital value of fixed interest investments will increase.

By David Lamb CFP™ MCSI

With inflation at its highest level in 40 years, how can you formulate an action plan to manage the resulting cost of living crisis?

The first thing to do is not to panic!

The second thing is to complete a detailed budget analysis. This will help you plan how much you can spend each month and help identify areas where savings can be made.

This analysis will only work if you are honest about your income and expenses; it must be detailed and accurate.

Refer to bank statements, investment statement, P60s or pay slips, credit card bills and recent utility bills.

Look at your expenditure and identify where you can make savings.

Never has the saying ‘look after the pennies and the pounds will look after themselves’ been so important.

The UK Parenting Forum shared some practical tips for looking after the all-important pennies, including:

• Showering at the gym, not waiting until you get home. This is, of course assuming you use your gym membership. Research has shown that 77% of UK adults who sign up for gym membership then fail to attend regularly, wasting an average of £303 per year.
• Buy porridge in bulk instead of expensive children’s cereals
• Consider charging phones and battery packs at work (with employers’ permission, obviously).
• Paying for insurance monthly incurs interest. Consider paying for this on a 0% purchase credit card, then pay off monthly. Discipline is required.
• Cut dishwasher tablets in half.
• Use washing powder not liquid and use half the recommended amount unless the clothes are really dirty (powder is cheaper than liquid anyway). Don’t bother with fabric conditioner as you will not really notice the difference.
• Dried beans and pulses are really economical and could replace the Friday night curry (you have stopped your takeaways haven’t you?)
• Check the price of fruit and veg price/kg. Often the smaller bags are cheaper.
• Bagged fruit and veg is often cheaper than loose.
• Plan meals, and shop only one each week, but plan for eight days. On day eight use up all the odd bits and pieces in the fridge. This will result in you shopping for 46 weeks of the year and gain six weeks’ extra housekeeping money.
• Turning off electrical devices, instead of leaving them on stand-by. It has been estimated* that the average UK household wastes £147 each year by having devices on stand-by for example:
  • Television £24.61 pa
  • Set top box £23.10
  • Games console £12.17
  • Microwave oven £16.37
  • Shower £9.80
  • Washing machine £4.73
  • Printer £3.81 (I’ve just switched mine off!)
  • Phone charger £1.25.

* Source: British Gas

All very helpful, but this will give you the biggest saving: most houses are heated between 18°C and 21°C.  According to the energy supplier Utilita, just reducing the temperature by 1°C could save as much as £321 a year. Just wear a thick jumper and you’ll not notice the temperature, but you will notice the savings!

You can use our Truth about Money calculator to help you with your expenditure calculations and build finance projections at:

lambfinancial.truthaboutmoney.co.uk

If you want to understand the causes of the growing financial crisis gripping the UK economy, a video explainer has been published today by Joe Blogs.

The film provides a clear analysis of the background behind the events of recent days which have seen the value of the pound plunge and fears grow over increasing interest rates and their impact on mortgages and the overall cost of living.

Fine out more about Joe Blogs here: https://www.buymeacoffee.com/JoeBlogs

Watch the video here: RUSSIA – UK in DEEP TROUBLE as Sterling Hits RECORD LOW & War Fuels INTEREST RATES & INFLATION Rises – YouTube

(Click on ‘skip ads’ and scroll back to the start of the film for more background on the current UK economic position)

By David Lamb CFP™ MCSI

For those of us whose memories stretch back that far, in April 1976, Brotherhood of Man and Abba were at the top of the UK music charts, Jim Callaghan became Prime Minister and the Ford Escort was the UK’s best-selling car.

The Bank of England base rate was 9.75% and inflation was 13%, (having peaked at 25.9% the previous October).

Moving back to today, 46 years later, inflation is estimated to be heading for 13% or more again. But what does this mean for us and our standard of living?

Key findings of independent think tank the Resolution Foundation, which is focused on improving the living standards of those on low to middle incomes, in its latest briefing note include:

• average real pay in Q2 will be 9% lower than two years earlier, and will wipe out all pay growth since 2003
• real household income will fall by 5% in 2022-23 and 6% in 2023-24 – a drop of £2,800 for those earning the average salary
• a combination of earnings stagflation and the energy shock means the country is on track for two decades of lost income growth.

The effects are already being felt. Research by insurance giant Aviva has found that 40% of 55 to 64-year-olds are struggling financially and ‘up to their eyes in debt’.

More than a third of over 55-year-olds feel they are having money difficulties; they typically spend a greater proportion of their income on food, energy and fuel, with it being calculated that they would need an extra £257 each month to feel financially secure.

75% of these people are looking for ways to boost the income, and a third look for food reductions in supermarkets on a regular basis. A further 8% say that they have had to delay retirement to make ends meet.

Added to these stresses, many of this generation are trying to support elderly parents, whist still supporting grown up children.

Research by another insurer, Legal and General, has found that the average working household is only 19 days from a financial crisis if they were to lose their jobs. Almost two million adults have no money left at the end of the month, an increase of 330,000 over the previous two years.

Older workers tend to have more reserves, providing up to 99 days in the event of a loss of income but these households are also more likely to overestimate the emergency fund, assuming they can last for 180 days.

The main issue with this is that this age group have less time to rebuild their funds before retirement.

Accumulating an emergency fund is essential and we would recommend holding the equivalent of between three and six months’ income. National Savings and Investments Premium Bonds can make an excellent home for an emergency fund.

Financially, most people expect a tough winter, but what can be done to ease the pressure? In my next blog, I will suggest a cost of living action plan.

By David Lamb CFP™ MCSI

It does not seem so long ago that we were in the middle of a pandemic and inflation was only 0.3% (November 2020).

The reason inflation was so low was down to the lockdowns, when we could only really buy essentials; we could not go the pub or restaurants, go on holiday or even have a haircut.

This resulted in the second quarter of 2020 recording the highest level of savings on record at 23.9% of disposable income or £140bn. The average for the previous decade was 8.5% (source: Office for National Statistics/ONS).

When the lockdowns were lifted, this money gushed through the economy, increasing inflation to 3.9% by June 2021.

The Bank of England has an element of control over this inflation. Increasing interest rates makes the cost of borrowing more expensive, effectively taking money out of the economy, so people have less to spend which therefore reduces demand.

This can, initially, seem good news for savers, as they will experience higher returns on their deposit accounts. But the bad news is for those whose investments hold fixed interest bonds such as gilts, where the capital value is likely to fall.

Many investment funds use fixed interest product to offset the volatility of equities. If you hold a cautious managed type of fund, you will likely hold fixed interest investments.

Of course, the interest rate on deposit account is not the real rate of return on those investments. The real rate of return is the interest rate minus inflation.

The current rate of inflation (latest figures are for the 12 months to August 2022) is 9.9% (Source: ONS).

According to Moneyfacts, the best one-year fixed rate deposit account is paying 3.3%. That is a real return of -6.8%!

And on September 9 investment bank Citi warned that it expects inflation to hit a 50 year high of 18.6% early in 2023.

The causes of the current inflationary pressures have changed since the end of lockdown and now include the higher prices of goods we buy from abroad. Businesses are charging more because they face higher costs and there are more job vacancies than there are people to fill them, meaning employers are having to pay higher wages to attract new applicants.

The highest price rises over the past year include fuel at the forecourts (+43.7%), transport (+15%), food and non-alcoholic beverages (+12.7%) and housing/household services (+9.1%).

However, the major cause of the current high inflation is the cost of energy. Russia’s invasion of Ukraine has led to the price of gas more than doubling since May this year, with Vladimir Putin being accused of weaponizing energy.

We are effectively at economic war with Russia.

Everybody is aware that the following winter is going to be tough, but let’s look to the positives: at least it is an economic war, the Government is intervening to freeze household energy costs and the Bank of England is forecasting inflation to be back to its target of 2% in around two years.

If you are concerned about the longer-term effects of inflation on your wealth, please seek professional advice. In my next blog, I will look at the possible consequences of high inflation to investors.

By David Lamb CFP™ MCSI

When people complete our ScoreMy questionnaire for the first time, the most common low score is not worrying about money.

Financial stress can take a huge toll on your emotional and physical health and your relationships and the overall quality of your life, leading to insomnia, weight gain and depression. It’s not worth it; there are more important things in life than money!

A detailed financial plan can help remove this anxiety.

Detailed data analysis, including understanding your income, expenditure, assets and liabilities can help identify the cause for concern. This process will also include – you’ve guessed it – cash flow projections.

Once the issues have been identified, a financial plan can be developed to address these issues.

Plans could include a spending plan to ensure you do not exceed your budget or create some spare money to increase savings and how to repay debt more quickly (the word ‘mortgage’ contains the French word for death so get rid of it as quick as possible!)

Also planning for retirement so you can stop doing the things you don’t want to do and start doing the things you do want to do. All without the fear of running out of money.

There is no point in creating a plan if it is not implemented. A well-structured financial plan will include simple actions, steps to help you achieve your objects.

How do you eat an elephant? In small bites.

Life is complicated and circumstances can change, so it is essential that your plan is reviewed on a regular basis and adjustments made as, and when, required.

Along the way you are bound to suffer setbacks. These things happen, don’t beat yourself up but get back on track as quickly as possible.

Professional advice can be invaluable in helping to overcome money worries.

In extreme cases the following websites may be helpful:

• nationaldebtadviceline.org.uk
• nhs.uk/mental-health/advice-for-life-situations-and-events/how-to-cope-with-financial-worries

In my experience, the causes of money worries are rarely unique and in most cases a financial planner will be able to draw on their experience to help create a well-structured financial plan to help you exorcise those money worries.

A word of warning: if you meet a financial adviser and they want to know about your money without getting to know you first, they are probably more interested in your money than you – and are best avoided.

If you do not know how much is enough, you do not have a financial plan.

• You can build your own cash flow model at lambfinancial.co.uk and score your financial planning at lambfinancial.co.uk/scoremy-financial-planning

Do you want to improve your lifestyle? The answer is a definite yes for most of us, but to do so you need to balance various aspects of your life.

So how do you achieve this?

As part of our lifestyle financial planning service, Lamb Financial has developed a simple online tool that enables you to rate how you feel about all the key components including your physical and emotional health, relationships, time, money and personal fulfilment.

Using the FREE Lifestyle Wheel web app you give yourself a score on each of ten questions and it will join the dots to see whether you are in for a bumpy or a smooth ride – and suggest areas for improvement.

If you have a good balanced lifestyle, you will have a nice big round circle. You may score low but have a nice round wheel, but this probably means you are in for a bumpy ride!

Any buckles in your wheel will suggest areas for improvement. If you need to improve your lifestyle, think about why you have given yourself that low score, what you can do to improve it, when are you going to take action and what the financial implications are.

Lamb Financial Director David Lamb CFP™ MCSI, who devised the Lifestyle Wheel, said: “When I have initial meetings with new clients one of my key priorities is to establish what kind of lifestyle they desire, in order to identify how much is enough to fund this whatever happens.

“The Lifestyle Wheel is a simple way of finding out how they feel about all the important aspects of their life, and where they need to make changes to achieve a balanced lifestyle. But we also have added it to our website so it is free for anyone to use.”

The new facility is part of a groundbreaking web app called ScoreMy which enables professional advisers who offer financial planning, estate planning and other similar services to measure the impact of their counsel on clients, informing future actions.

If you would like to test out the Lifestyle Wheel, visit: https://lambfinancial.co.uk/scoremy-lifestyle-wheel

By David Lamb CFP™ MCSI

Nobody likes to think about catastrophe scenarios such as death, serious illness or even losing a job. But failure to plan can be planning to fail and will subconsciously create nagging worries.

The first thing to do should be to create an emergency fund, which I discussed in an earlier blog.

What would happen if you were to die? Would your financial dependents be able to maintain their lifestyle without the fear of running out of money?

Life assurance of £100,000 may sound a lot of money, but is it enough? If your net income is £2,500 each month, it does not provide much more than three years of income. If you have a young family, they may run out of money.

If you were to die, would your family need a lump sum, or an income? Insuring for an income is usually lower cost than insuring for a lump sum. You are paying for something you do not want to benefit from, so get it as cheap as possible.

How did you arrive at your level of life assurance? A detailed shortfall analysis will help you calculate how much life assurance you may need. Cashflow modelling can help with this.

Will any life assurance go straight to your family, when they need it, or will it get delayed whilst probate is processed and are there any inheritance tax issues? Placing a policy in trust can help resolve these issues but careful planning and professional advice is essential.

What would happen if you were to suffer a critical illness? Often a first heart attack is nature’s way of telling you to slow down. Do you really want to have to rush back to work because you need to pay the mortgage? A critical illness policy could provide a cash injection that could be a life saver!

It is generally considered sensible to accumulate a pension fund so that you do not need to rely solely on a State pension in retirement. If you are incapacitated, without any income protection, you may need to survive on state benefits with far more financial responsibility.

Another important issue to consider – and one that most of us do not want to do think about our loved ones or ourselves – is losing mental capacity.

Many people think ‘it won’t happen to us, we’re fine’, but what would happen to your finances if this was to happen?

Effectively the Court (of Protection) comes along and puts a padlock on that person’s finances, and they and their family lose control of their money. Cheques can’t be written, money can’t be transferred and bills cannot be paid. A deputy is appointed and so starts a long and expensive process.

The key to that padlock is a Lasting Power of Attorney, but you can only buy that key when you have mental capacity. Once that is lost it is too late.

You can build your own cashflow model, for free, at lambfinancial.co.uk

If you do not know how much is enough, you do not have a financial plan.

By David Lamb CFP™ MCSI

Many people do not make wills. The most common reasons for this are procrastination, fear of tempting the ‘Grim Reaper’, not being able to decide who should inherit, not wanting to pay the fees or thinking that assets will pass automatically to the family.

Then there are the people who are just selfish and don’t care what happens after they have gone.

There are many reasons to make a will, which could include:

• To name guardians for children
  • If you do not state who should look after your children, should you die, the family courts may need to choose a guardian. This may not be somebody you would agree to.

• To provide for financial dependents including stepchildren
  • This may include allocating funds for education or a deposit on their first home. Stepchildren will not automatically inherit, which may not be your wish if they are a big part of your life.

• To protect partners
  • Unmarried partners will not automatically inherit if there is no will.  This could include the family home.

• To avoid family disputes
  • Family arguments often arise when the deceased is intestate and can be costly and damage family relationships.

• Inheritance tax planning
  • Writing a will can be a good opportunity for inheritance planning which, don’t forget, is a tax on accumulated assets after paying tax.

• Who will take care of your pets?
  • You may also want to allocate money for food and healthcare.

• To protect your digital assets
  • What do you want to happen to your music, photographs, emails etc? How can people access these? Can your passwords be located?

There may also be issues with your beneficiaries:

• Are they responsible enough to benefit? If not, what could the possible consequences be?

• Your beneficiary’s legacy may be lost should they be involved in divorce or bankruptcy proceedings at the time of inheriting. Do you want your potential ex son, or daughter in law, to effectively inherit your assets?

• Ultimately, who will benefit from your personal assets your children, or your stepchildren? Or even your surviving partner’s new partner!

Death in service benefits and pension death benefits can be very flexible, with a little planning, but many people do not give much consideration to nominating beneficiaries, losing out on huge potential benefits.

Score your financial planning at lambfinancial.co.uk

By David Lamb CFP™ MCSI

Do you know how much you want, need and will leave after your death, and how you are going to achieve this?

These questions are so important!

Many people when asked how much they want to leave will say nothing. One client told me that the last cheque he wanted to write would be to the undertaker and, if we did our job well, that cheque would bounce!

Most people will leave something because they don’t know when they are going to die (which is not too helpful for financial planning but probably good news).

But even those who want to leave nothing will end up leaving far too much because they fear spending too much and running out or, after a lifetime of savings, their brain is not wired to spend.

How much you need to leave changes throughout your life. Those with financially dependent families probably need to leave quite a lot to make up for lost income in the event of the early death of the breadwinner. Once the children are financially independent, so long as your partner is financially secure, you probably do not need to leave a lot.

How much you are going to leave is an essential question that needs to be answered to protect financial dependents.

Using cashflow modelling, these questions can be easily answered and can result in families being financially secure, no matter what happens, and spending money becomes easier because you know how much you can spend without running out of money.

Of course, many people don’t want that cheque to bounce and want their loved ones to benefit from their wealth once they no longer need it but you do not necessarily need to die before you no longer need it.

Your cashflow projections will indicate how much you can afford to give away without compromising your financial security. Why wait for your death before your family benefits?

If you are 30 when your child is born, and you live to the age of 100, they will not inherit until they are 70. They may have paid for their children to go through university and have helped them get on the housing ladder years before.

When they receive their inheritance, they probably do not need the money! If you are never going to spend the money, give it away when it is actually needed – and when you will be there to see the smile on their faces.

Hoarding your money without gifting or spending it is a waste of opportunities.

You can build your own cashflow model, for free, at lambfinancial.co.uk

By David Lamb CFP™ MCSI

Nobody likes to pay unnecessary tax but are you taking advantage of all available methods to reduce your tax bill legally?

With careful planning, you can:

• Reduce your income tax
  • Is your tax code correct, can you claim tax credits and anything from the marriage allowance or pay into a pension? You should also ensure that you meet the tax return deadline and reclaim any overpaid taxes.

• Gain employee tax benefits
  • These could include a season ticket loan to reduce travel costs, claiming tax free childcare, switching to a low emissions company, or (my personal favourite) buying a bike on the right to work scheme.

• Cut tax on your savings
  • This can include maximising your personal savings allowance, making the most of your ISA allowance, using the starter rate for savings.

• Use tax deductible expenses (if self-employed)
  • Reclaiming the running costs of a car when used for business, changing your accounting year end to help with cash flow, carrying forward annual losses to offset against profits from a more successful year.

• Cut tax on your investments
  • This may include maximising your dividends, using your capital gains tax allowance (and avoid CGT it by investing in ISAs), transferring assets to a spouse, investing in junior ISAs and switching investments to capital boosting investments. For the more adventurous, investing in enterprise investment schemes or venture capital trusts may be an option, along with bank shares through your company.

• Save property income tax
  • By using the rent a room relief or claiming landlord’s expenses.

• Save inheritance tax
  • This has been described as a voluntary tax paid by those who dislike their children even more than they dislike the Inland Revenue. A lot of potential tax can be saved with good planning.

• Make charitable donations
  • Doing this via gift aid can help if you are subject to higher or additional rate tax. The charity can also benefit from reclaiming tax on the donation.

Score your financial planning at lambfinancial.co.uk

By David Lamb CFP™ MCSI

I have seen many investors with a portfolio that has no real relevance to their lifestyle and ambitions.

Often they have some lower risk investments in deposit accounts and then longer-term investments to provide the best returns they can get, or an income to supplement their pension.

But far more can be done to make your money support your lifestyle.

In a previous blog I discussed having an emergency fund and then investing money in lower risk deposit accounts, to fund expenditure more than income within the short to medium term (up to five years).

Longer term, inflation is probably the biggest threat to your wealth.

I have said that I see an awful lot of people taking more risk than they need to take with their investments, but almost as common as taking too much risk is taking too little risk.

People fear investing money in the stock market so they keep all their hard-earned wealth in deposit accounts, safe in the knowledge that this time next year they will have the same amount plus interest. Unfortunately, they forget about inflation.

If you have £1,000 in the bank this year and earn 1% interest, next year you will have £1,010. Unfortunately, if inflation is 3%, the buying power of that £1,010 is only £979.

Their money is actually decreasing in value but the investor does not see that; however they do see the cost of living increasing.

To counter inflation risk, over the longer term you may need to take a little more market risk, but over the longer term history shows you will maintain the real value of your money.

If you are never going to run out of money, don’t take unnecessary risks to get more money than you need; it may go the other way. Instead, reduce your level of risk to just enough to match – or slightly beat – inflation.

Another consideration when structuring your wealth should be asset allocation and cost.

This often has the benefit of enabling you to ignore the financial industry’s hype. It is an industry full of people making promises they can’t keep, promises about ‘beating the markets, picking the best stocks and promises of high returns. If it sounds too good to be true, it probably is.

Thorough research shows that asset allocation and low charges have much more influence on returns than a fund manager’s skill (which can add more risk), market timing and all the other things the ‘industry’ claims it is good at.

If you would like to know more about evidence-based investing, we have an interesting booklet that we would be happy to email, free of charge. Please email laura.fairley@lambfinancial.co.uk to request a copy.

It is also important to consider how your income requirements change throughout your life.

For example, in retirement you will probably want to spend more in the earlier stages (‘active’ retirement) than the later stages (‘traditional’ retirement) but many people are advised to take a level income throughout retirement. This often means they don’t have enough money when they want to spend it and too much money when they can’t spend it! 

Again, cash flow modelling can help with this.

The main purpose of wealth is to support our lifestyles. As our lifestyle changes, our wealth needs to be able to adapt to those changes. If you do not know how much is enough, you do not have a financial plan.

• You can build your own cash flow model at lambfinancial.co.uk and score your financial planning at lambfinancial.co.uk/scoremy-financial-planning

Investors should not panic about short term down markets following the invasion of Ukraine, and instead take a long term approach.

That’s the clear advice in our Ukraine-Russia Crisis guide, just published on our website.

The 24-page guide looks at emotional v market volatility, risk tolerance and how it is important at times like this to speak to your financial advisor who will take the emotion out of decision-making to tactically exploit market dislocations and rebalance portfolios.

Download your free copy here.

By David Lamb CFP™ MCSI

During my three decades in financial planning I have found many investors take far more risk with their money than they need to. This often leads to tears because they have invested in poor performing or risky investments.

Financial advisers need to complete an investment risk analysis before that client invests their money, as part of the regulatory process.

To me, this process is like sticking pins into their clients to find out how much pain they can take and then deliver that pain! The adviser is happy because they have followed the regulatory process and the client is temporarily happy because they will follow the advice.

Most risk analysis processes focus primarily on market risk. This is the possibility of the loss of some of the original capital because the value of investments linked to the stock market can vary and, although the long-term trend tends to be upwards, at any time the market might dip meaning the investment is worth less than was originally invested.

This is probably most investors’ initial concern because of previous experience investing with the wrong risk profile.

But there are other types of risk, including shortfall risk and inflation risk (I will discuss the latter in my next blog).

Shortfall risk is when the amount invested to reach a financial goal at some time in the future may not reach the target amount. Where investments are chosen with no or low risk the returns are likely to be lower or could fall short of the amount targeted.

Knowing how much is enough to give you your desired lifestyle, without the fear of running out of money, will help you determine the returns you need to achieve from your money and therefore how much risk you need to take.

If you are not going to achieve your desired lifestyle with the returns you are earning on your existing investments, you may get closer to your goals if you take a little bit more risk to get those higher returns.

Knowing the returns you need to achieve will help you make an informed decision as to how much risk you should take.

If you are achieving returns above your needs, you can reduce the amount of risk you take with your money.

If you do not know how much is enough, you do not have a financial plan.

You can build your own cash flow model at lambfinancial.co.uk and score your financial planning at lambfinancial.co.uk/scoremy-financial-planning

By David Lamb CFP™ MCSI

As I mentioned in my first blog in this series, financial planning is about ensuring when you have one foot in the grave and look back over your life you have no regrets.

Because by then it will be too late to do anything about it and you will be mourning lost opportunities.

A bucket list is an essential – and hopefully fun – way of making the most of your life. After all, as far as we know we are only on the planet once!

Make a list of all the things you want to do or experience in your life and get an estimate of the cost. Crucially, give yourself timescales – or you may never get around to achieving them.

These can be built into cash flow projections and then your wealth can be structured to fund this list, as and when you want to tick each item off.

A bucket list does not have to be about frivolous or expensive things (we find that seeing the Northern Lights and campervans are the most popular) but could include paying for children’s weddings or house deposits.

Research has shown that buying experiences is generally more rewarding than buying things. Build up the memories for later retirement.

The following example shows why a bucket list before retirement is essential.

Suppose in retirement that top of your list is a very expensive world cruise. Cash flow projections may show that if you retire one year earlier you will not be able to afford that holiday of a lifetime. But if you work for an extra year, it will affordable.

If you retire before making your list and then decide (and cost) what you want to do, that ambition may be unaffordable. You may have regrets about retiring and it may be too late to return to work.

Knowing that you need to work that extra year will enable you to make an informed decision; is your priority to retire early or go on the cruise?

If you decide to work that extra year, at least you know why you are continuing and you will be working for a purpose. That extra year may therefore be less stressful.

Bucket lists are an essential element in financial planning. Don’t look back and have regrets.

• Score your financial planning at lambfinancial.co.uk

By David Lamb CFP™ MCSI

It is a momentous week for Lamb Financial.  For it’s exactly 30 years since I launched the business which went on to become Lamb and Associates (now Lamb Financial).

And what a week the first week in February 1992 was. In other news, Foreign Secretary Douglas Hurd signed the Maastrict Treaty that formed the EU, Her Majesty The Queen was celebrating her Ruby Jubilee and a certain Kevin Keegan was named Newcastle United’s new manager.

The average price of a house in the UK was £56,500 while petrol cost around 40p per litre. Meanwhile George Michael and Elton John were number one on Top Of The Pops with ‘Don’t let the sun go down on me’.

The cutting edge of communication was the fax machine, while our computer was an Amstrad PWC 8256 that you had to stop from printing if you needed to use the telephone as it was so noisy.

If we needed to obtain a quote or illustration we faxed the life insurance company, who would then post it. Incidentally those illustrations did not reflect the actual charges for the product but merely ‘industry averages’.

Commission disclosure was rightly introduced in the mid ’90s and – even better – in 2012 advisers had to agree their fees with the clients.

At least 20 insurance companies had offices in Newcastle. Now only three names remain, and none have local offices.

Along the way there have been a few scandals – Equitable Life, pensions mis-selling, PPI and most recently the Neil Woodford saga. Many of those involved with these scandals have long since left financial services and, generally, the standard of advice is much higher.

But financial services is an industry geared to selling products and not a profession (yet), and will remain so until advisers do not rely on selling products to earn their income and provide genuine, impartial financial planning advice.

Over the last 30 years I have learned a lot, including:

• Product providers, by their nature, want to sell products. They are not really interested in financial planning, which should be left to well qualified professional advisers, with no links to the product providers.

• Most active managed funds do not provide good value for money. A mix of generally passive funds with an asset allocation structured towards the client’s individual risk profile and their objectives is much better.

• It is not up to me as a financial planner to determine if I provide value for money for my clients; it is up to them. I should ask them on a regular basis if we are achieving this.

• The financial services industry has brainwashed people to believe that financial planning is about financial products, and many financial advisers do not realise this. Financial planning (especially lifestyle financial planning which we specialise in) is not about money or financial products, but about using a client’s resources – not just their money – to support the way they want to live their lives.

• There are more important things in life than money: health, relationships, and time being the top three.

• It is important to focus on a balanced lifestyle. In my early years with the business I regularly worked more than 12-hour days and many evenings, only cutting back when my son was born. Running a business takes a lot of focus and energy. It is important to keep these in perspective.

• Many of my clients have been with me for much of my 30 years (and many I’m honoured to call my friends, not just clients), and their objectives change over time. When we set out together, some wanted Porsches and Ferraris. When they get older, relationships and time are more important than the flash toys.

• More people come to us wanting more time than more money.

• Most importantly, all clients want to know how much is enough?  Enough to give them the lifestyle that they want, without the fear of running out of money, whatever happens.  No financial advice should be given until this is known.

There are many other things that I have learned over the last 30 years that have helped me develop a lifestyle financial planning business that I am proud of.

As a Certified Financial Planner accredited by the Chartered Institute for Securities and Investments – one of four firms in the North East and only 67 nationwide – I am confident that we are now one of the leading businesses of our type in the North of England.

The final lesson? Time flies when you are having fun!