SJP Statement library
“We welcome the policy paper on advice guidance. As the paper states, there is unlikely to be a silver bullet solution. One way to fill the advice gap is through greater availability of advice, but we agree it will also likely need to include methods to help improve the availability of guidance, some form of simplified advice in a specific set of circumstances, as well as a greater public education about what is available. The proposed mix in the paper seems to be a sensible way to start.
“As we look to work together to find solutions, we will need to ensure a situation is not created where a consumer may feel they have received suitable advice when, in reality, they haven’t. The boundaries between guidance and regulated advice must not become blurred to the extent that consumers are unclear about the support they have received. This will be particularly important to ensure that consumers who receive a 'people like you' suggestion are fully aware of the limitations of that guidance and that the product suggested may not be suitable. We will continue to work alongside our industry peers, Government and FCA to collectively address this issue.
“The benefits for taking advice are very clear. It makes a considerable difference to an individual’s future financial health and provides the financial confidence needed to navigate life events and periods of uncertainty, particularly when markets prove more challenging. Addressing some of the barriers to advice and better connecting people with the help they need can encourage people to take those first steps towards investing for their futures. Better planning not only serves an individual’s long-term ambitions, but also supports the economy to grow.”
SJP responds to the Education Committee’s new inquiry into strengthening financial education
Vicki Foster, Director of Responsible Business at St. James’s Place comments: "St. James’s Place warmly welcomes the Education Committee’s inquiry into strengthening financial education. As the largest provider of financial advice, we see the benefit of people making informed decisions with their money, and the damage to society of low levels of financial literacy. We are also passionate about creating a positive impact through committing to help improve financial education for young people.
“We are taking several steps to improve financial literacy. So far in 2023, the St. James’s Place financial education programmes, delivered by our advisers and employees to schools, community groups and in areas of deprivation, have reached 3,712 young people through face to face and virtual workshops1 led by SJP volunteers.
“In 2022, we committed to sponsoring 21 schools to become accredited ‘Centre’s of Excellence’ for financial education over the next three years in collaboration with Young Money. Our sponsorship will fund one-on-one advice from an expert Education Consultant, financial literacy training for staff, and access to financial education resources for each school. In addition to this funding, each school will benefit from the support of a local SJP office location - including work experience opportunities, mentoring, and volunteering.
“We believe there is much more than can be done in this space, and the industry, and policymakers must work together to help improve the financial literacy of the younger generation. We look forward to being a part of this change, to supporting initiatives like this inquiry, and working with others to find solutions.”
1- As of Q3 2023 there have been 156 financial education workshops led by SJP Volunteers.
Hetal Mehta, Head of Economic Research comments on today's core inflation figures
Commenting on today’s core inflation figures Hetal Mehta, Head of Economic Research at St. James’s Place, said: “While today’s inflation drop to below 5% will be hailed as a major milestone in the progress to 2%, the UK remains one of the highest inflation economies. Core inflation is still stubbornly sticky at 5.7%. The next phase of inflation reduction will almost certainly be more painful for the economy as the easy wins on energy after largely behind us.”
On Sunday 12th November 2023, the Mail on Sunday Money published an article on St. James's Place which looked at the impact of the future charges changes for pension clients who join after 2025. This follows analysis from Halwyn Capital, an Edinburgh-based investment advisory business.
Contained within the article were references to this year’s Value Assessment Statement, supporting materials for which can be found on the Performance Hub.
Our response to the coverage is shown below.
'We can’t agree that the conclusions being drawn are reflective of the overall position.
The lower ongoing charge under the new structure, whether investing in unit trust and ISAs or bonds and pensions, will be applied to all existing clients. The analysis fails to mention this.
In addition, we have structured the charges so that the majority of new clients will benefit from lower charges. All new clients investing in our unit trusts and ISAs will benefit from lower charges and so will those in bonds and pensions if they are investing over the typical long term nature of these retirement products.
Instead, the focus of the analysis is on one scenario in which new bond and pension investors save for a shorter length of time. This gives a misleading view of the overall picture and the positive benefit of the changes overall for clients.
In the new bond and pension charging structure, we replaced the Early Withdrawal Charge with a simple initial charging structure to cover the advice provided so it is comparable with the rest of the industry. So, while some new shorter term clients will pay more under the new structure, the majority will pay less, as part of an overall reduction in charges.
It is important to note that even for that group of potential clients the fee structure will compare favourably to the wider wealth management industry. There has been a misperception that SJP is expensive compared to its peers. The new charging model will mean new clients will be able to easily compare with other providers before making an informed decision, and when they do they’ll find that SJP charges compare favourably across all areas.'
An article has been published in the Sunday Times this morning concerning an ex-Partner, whose claims we fully reject.
Our business sale and purchase (BSP) scheme is designed to facilitate good client outcomes by providing continuity of ongoing service to clients as successful Partner businesses grow and as Partners retire or choose to downsize their business.
We run the scheme with a responsible lending lens and our average loan-to-values are low at c. 30%, with the average Partner who buys a business working for eight years with SJP before they choose to do so.
We assess debt service cover and affordability at prudent levels when making lending decisions and loans are extended to eligible Partners only after a rigorous underwriting process. This assessment assumes no new business, ensuring that the debt is affordable at the time of borrowing.
We have historically low write-off rates, which evidences the careful nature of our approach, and have a range of support measures in place to help Partners if ever needed.
Pension contributions continue to increase
“Personal pension contributions have been on the increase since 2016/17 and the year 2021/22 was no different, although the increase is only minimal. This is slightly surprising given the cost-of-living crisis was impacting individuals, having really started in late 2021. We may see more cutting back in the following year due to the pressures increasing over that period. This means that the amount of tax relief granted has again increased, but we should remember that in order to get higher rates of tax relief you do need to pay these higher rates of tax.
“The headline figures for tax relief always appear staggeringly high, but we should remember that they also increase the relief on investment income as well as the tax that would have been paid should employer contributions have been paid as income. The income tax on the employer contributions makes up the majority of this relief (59%), rather than just being paid to the high earners. In addition, employers will be receiving significant national insurance savings, compared to if they paid these contributions as immediate salary.
“Alongside this, the average contribution has dropped slightly as membership has increased a little again following the significant drop in 2020/21. This is likely to be because those who struggled to continue membership of a scheme in Covid are now getting back on their feet and into regular work.”
Annual Allowance
“The value of pension contributions attracting annual allowance charges dropped in 2020/21 following significant increases since 2015/16. But this bounced back higher again in 2021/22 with both the total number reported and the total value reported increasing significantly in 2021/22. It is difficult to pin an actual reason for this significant change, but it is at least partly because of the changes in tapered annual allowance with a drop from £10,000 to £4,000 as the lowest a person could be tapered to. However, less people should have been impacted by the taper due to the increases in the adjusted and threshold income figures. The budget changes, increasing the annual allowance and tapered annual allowance from 2023 should mean that this will come down again in the long run which will be a positive to savers.
“The complexities in this area make it very difficult for individuals to plan and get it right, without professional help. Those in public sector schemes are left at the mercy of legislation and timing of pay reviews which mean they can be impacted inadvertently with no way to control this.”
Lifetime allowance
“Although we now know that lifetime allowance charges are a thing of the past from April 2023, these statistics yet again show significant increases in the charges applying year on year to individuals with the number reported and the overall value increasing again. This is likely to be because of the frozen allowance hitting harder as funds continue to grow. We welcome the removal of these penal charges but still await the full legislation of the replacement tests, which appear more complexed although hopefully more generous for those drawing income.”
On Tuesday 26 September, The Telegraph featured an article covering several themes with a focus on St. James’s Place. These are addressed individually below.
Claims management companies
We review all complaints on a case-by-case basis and offer redress where we recognise service has not met the standards clients should expect. We regret any occasion when a client has cause for complaint and would always urge clients to speak with us directly if they have an issue they would like to raise, rather than go via a claims management company where clients can expect to pay commission approaching 50% of any resulting compensation.
Template letters and ongoing advice
Our SJP Partners and advisers build long term relationships with their clients and get to know and understand their needs over the long term. The ongoing review of the continued suitability of their investments to meet their financial planning goals is an essential part of the service we offer. Clients choose to pay for this ongoing advice service as it is key in providing the confidence that financial plans remain on track over time by providing a regular opportunity to revisit investment objectives, discuss financial goals and changes to personal circumstances.
We recently increased our support to advisers around the ongoing advice service by providing additional guidance and tools to our Partnership, which includes template letters and questionnaire our advisers can download, tailor to their clients’ circumstances and share with those clients where it has not been possible to arrange an annual review meeting in the past 12 months. This is not a mass mailing to clients but rather an additional resource our advisers can use as and when appropriate to ensure clients continue to receive the value of ongoing advice.
Bestinvest Spot the Dog
In our view, investors should remember that past performance is no indicator of future performance, and approach short-term performance rankings and recommendations with a healthy dose of scepticism. Research clearly shows that selling poor performing funds to buy high performing funds often negatively impacts investor returns over the medium to long term.
Analysing the 2020 Spot the Dog report by way of an example, the worst-performing funds in that report have outperformed their top-rated funds over the next three years in all but one of 11 categories, with returns being over 10% higher on average. Performance rankings such as these often have the unintended consequence of promoting detrimental investor behaviour.
Alexandra Loydon comments on the impact of the BOE's interest rate on mortgages, and house prices
Alexandra Loydon, Director of Partner Engagement and Consultancy at St. James's Place, comments on the impact of rising interest rates on mortgages, house prices and the strain on household budgets:
"This is now the 14th consecutive interest rate hike at 5.25% as the attempts to contain stubbornly high inflation continue, and there’s no certainty that we have yet reached a peak in rates. Inflation is still almost four times the Bank of England’s official target and, while the rate is starting to reduce, progress is slow.
"There are certainly signs that this is starting to hit home for many people, with higher interest rates putting people off spending but also not leaving them with sufficient spare resources to save instead, not least as the cost of living continues to rise. The aim of increasing interest rates is to reduce demand for goods and services and push prices down. However, if there is too much widespread pressure on people and businesses, and consumer and commercial borrowers, it could tip the very fine balance and edge the economy into recession, without significantly easing the cost-of-living crisis.
"Evidence that house prices are starting to fall in many parts of the country could well be a sign that more expensive mortgages due to higher interest rates is having an impact on house purchases, as well as for those with existing mortgages. Anyone on a tracker, standard variable rate (SVR) or variable mortgage will be impacted immediately in an environment where mortgage rates are already the highest seen for many years. The key is to check affordability and if you are nearing the end of your fixed term, shop around for the best rates, including with your existing provider. Budgeting and planning to ensure you can keep up repayments are essential.
"For savers, don’t assume your existing provider will pass on the higher rates, as many banks have been very slow to do so in the past. Shop around for the best savings deals and be prepared to lock up your money for longer to achieve the best rates. When it comes to credit, prepare not to overspend and only use credit cards and loans for spending if you know you can afford to pay it off.”
This is now the 13th consecutive rise in interest rates and the highest rate, at 5% since the financial crisis in 2008. It is part of the Bank of England’s repeated attempt to control rising inflation, without any certainty that it’s reached a peak, meaning that we see further rate rises are now being factored in. With the OECD already suggesting that the UK will have one of the highest inflation rates for an advanced economy, and with the Bank of England nowhere near its official target of 2%, it’s unlikely it can afford not to look at continuing to raise rates this year.
It is mortgage borrowers, particularly those on tracker, standard variable rates (SVR) or variable rates, who are really feeling the direct pain of the continual Bank Rate rises. Borrowing may become more expensive for everyone but those on variable rates will be impacted immediately, so information on the extent of the rise and the affordability of the mortgages is essential. Those nearing the end of a fixed term deal should shop around to secure the best rates they can, but if mortgage holders foresee that costs may be unaffordable, they should engage sooner rather than later with their provider.
In fact, placing continual pressure on consumer and commercial borrowers may put the economy into recession without providing sufficient relief to the cost-of-living crisis. For those struggling with the cost-of-living, the best advice is to understand the impact on outgoings, costs and monthly financial commitments and plan how to tackle them as best you can.
Having sustained higher interest rates should encourage saving rather than spending, but it’s proving a challenge, both to curb spending and for companies to resist higher than inflation pay rises. Savers should look across the market to the highest savings rates, as we know that savings providers don’t always pass on the increase or, if they do, they are slow to do so. The key is to shop around and be prepared to lock up your money for longer, if that’s an option to secure a higher rate.
Whilst the UK headline inflation rate remains in single digits at 8.7%%, it hasn’t fallen in May and will be small comfort to hard-pressed consumers when the CPI has risen to 7.1%. In all likelihood this could have a significant impact on the Bank of England’s interest rate decision tomorrow.”
Inflation is putting an increasing strain on families and businesses, but there is no doubt that the Bank of England will continue to keep the option of interest rate rises firmly on the table. Ahead of tomorrow’s decision, there is little scope for easing the pressure on borrowers and it is particularly stark for those on variable rate mortgages. As for investors, they will need to continue to diversify their portfolios to ensure they are as inflation-proofed as they can be and can reduce risk when markets are volatile.
Alexandra Loydon, comments on the reduction in inflation rates and its impact on the cost of living.
It’s good to see that the UK inflation rate is back in single digits, easing to 8.7% for April. This is largely driven by gas and electricity costs remaining stable, rather than reducing. However, it’s clear than food inflation remains troublesome – at over 19%, a 30 year high and a reminder that prices are not falling but that the headline rate is showing a reduction in the scale of the increase. The labour market also remains tight, which in turn puts pressure on employers to increase pay in line with inflation.
The implications are that as long as the economy can hold up, the Bank of England will keep the option of interest rate rises firmly on the table. This will add to costs for borrowers, including those on variable mortgage rates. As a result, there will be little easing on the cost of living. As for investors, they will need to continue to diversify their portfolios to ensure they are as inflation-proofed as they can be and can reduce risk when markets are volatile.
Luke Barnett comments on ONS Enterprise Investment Scheme tax relief statistics.
Commenting on the latest ONS Enterprise Investment Scheme/Seed Enterprise Investment Scheme tax relief statistics, Luke Barnett, head of tax advantaged strategies at St. James’s Place, said: “The latest statistics released for EIS/SEIS highlight the growing popularity and importance of these schemes. Pent up demand as the economic activity normalised following COVID restrictions, and strong performance across the venture space helped to shore up interest, and is likely reflected in the numbers. Investments into early-stage start-ups are crucial to the growth of our economy, driving significant research and development, building intellectual property and importantly creating skilled jobs. The availability of these schemes also helps to entrench the UK as a player within the start-up space and therefore helps to attract key talent from abroad.
“From a retail investors perspective, not only are these schemes a valuable tool for financial planning, but they also provide investors with the unique opportunity to get exposure to a bustling UK venture capital market. Largely uncorrelated returns to the broader equity markets can provide an important route to diversification. However, investments of this nature do bring with them a specific set of risks including loss of capital and illiquidity well beyond the stated minimum holding periods, and so investors should consider carefully if they meet their circumstances. We would also welcome much needed clarity surrounding the EIS and VCT sunset clause, to ensure that this very important industry continues to flourish.”
Alexandra Loydon comments on Bank of England interest rate rise, and potential impact on borrowers.
Since December 2021, we’ve now seen 12 consecutive rises in interest rates in an attempt to quell rising inflation, but it’s not certain that it’s reached its peak at 4.5%. With only a slight drop in inflation, the Bank of England is nowhere near its official target of 2%. Prices are currently rising at more than five times the target level of inflation, so I don’t think the BoE can afford not to raise in line with other Central Banks.
In theory, higher interest rates put people off spending and encourage them to save instead. With less demand for goods and services, prices should fall and inflation should continue to go down. However, it’s proving very challenging. In fact, putting too much pressure on consumer and commercial borrowers could put the economy into further recession, without significantly easing the cost-of-living crisis. It’s a very fine balance.
Both borrowers and savers will feel the impact of a further rise in interest rates. By raising interest rates, borrowing becomes more expensive. If you’re on a tracker, standard variable rate (SVR) or variable mortgage you will be impacted immediately – the key here is to know by how much and check affordability. If you’re not on a fixed term mortgage or nearing the end of your fixed term, then it’s worth shopping around for the best rates, but first check that your existing provider is offering you the best deal they can. Budgeting and planning to ensure you can keep up repayments is essential and, if you foresee not being able to, engage with your provider sooner rather than later before there are any issues.
If you’ve got cash holdings, search the market for the highest savings rates – don’t just assume your existing provider will pass on the higher rates, as many banks haven’t in the past. For those prepared to lock your money up for the longer term, you’ll likely secure a higher savings rate. We’ve seen over the last 11 rate rises that cash savers’ current providers often are not passing on the rate rises or are very slow to raise their rates, so savers need to shop around to secure the best deal.
With many people facing cost-of-living challenges, ensuring you have an understanding of outgoings and monthly financial commitments is essential, particularly knowing whether these will be impacted by changes to interest rates and inflation. You need to know whether and how you can afford them. Prepare not to overspend and only use credit if you know you can afford to pay off. If struggling, reach out for advice to free sources of help, such as Money to the Masses.
We have not been given sufficient time to fully investigate the client complaints sent to us at short notice. However, we take all complaints very seriously and each will be considered on its individual merits and we will of course look into these for the clients concerned.
We know that clients really value what SJP offers, and while we take comfort in strong levels of client satisfaction, advocacy, and a retention rate of 95.3%, it is important that clients receive the services they pay for. That is why we have committed to reviewing our records to the start of 2018 to ensure clients received the services from their adviser that they paid for. If for some reason they didn’t, or we can’t find evidence that they did, we're going to refund the ongoing servicing charges.
What is absolutely crucial is that if a client feels that they haven’t been serviced by their adviser, they should contact us directly. They should not go through a claims management company – this will not result in getting paid any earlier and they will charge commission approaching 50pc of any resulting compensation.
St. James’s Place responds to Yodelar’s recently published fund review.
“Yodelar’s analysis is not accurate. There are several errors in both the data used and the methodology they apply, including inappropriate sectors selected, flawed pricing data, and a rating system that is geared towards generating low scores for funds with less performance track record.
“The most important factor though, is this is not a like-for-like comparison. SJP fund performance reflects the total charge, including fund costs, administration, product charges and ongoing advice. By comparison, other funds show performance after the deduction of fund costs only. We acknowledge this makes comparison more challenging with other funds and are exploring ways to make such comparisons more accessible.
“On average, clients invest with SJP for 14 years and our solutions are designed to build wealth over the long-term. Clients do not invest in a single fund, but a diversified portfolio of typically 6-10 funds, with performance one of several factors considered in their construction.”
Seven top tips for small business owners ahead of tax year end.
Simon Martin, Chartered Financial Planner, and Consultant at St. James’s Place provides his seven top tips for small business owners ahead of tax year end.
“We have seen a raft of tax changes affecting business recently and this makes careful planning even more important. The impending corporation tax increase for many companies should encourage business owners to consider the impact on their financial plans and looking at legitimate means of mitigating the impact of the increase.”
1. Accelerate profits
If your profits exceed £50,000, you could accelerate them where possible so that they’re taxable in the financial year 2022/23 financial year, to lock in the 19% rate.
2. Delay expenses & losses
Conversely, you could consider delaying expenses, such as pension contributions where appropriate, beyond April 2023 to secure relief at a higher rate. Companies that have made losses would often carry back the loss to a previous year, which would generate a Corporation Tax refund at 19%. However, you may now wish to carry forward the loss where possible and obtain an increased tax refund under the new rate system.
3. Bring forward disposals
If you’re in the process of disposing of assets with a gain, this should be completed before the corporation tax change in 2023/24.
4. Use the Super-deduction
Firms planning significant capital spending – including on items such as computing equipment – should consider doing this before the generous Super-deduction Capital Allowance before the 31st of March 2023. You should undertake a review, as any decision needs to be based on your companies' circumstances.
5. Review your group structures
Companies with group structures, or that have common controls, should consider whether a different structure would be more beneficial under the new system.
6. Use research and development (R&D) relief
If your company has been involved in a project that seeks to advance science or technology, you could claim the valuable Research and Development (R&D) tax relief. Bear in mind that the R&D scheme will be reformed from April 2023, so make sure you factor these changes in.
7. Understand the impact on your financial planning strategy and seek advice
The changes to corporation tax rates and dividend taxation will likely have an impact on your financial planning. Reviewing the position with your adviser ensures your plans are on track and you can utilise planning opportunities to reduce the tax impact.
Many of the planning ideas above require professional advice and it is vital to ensure this advice is sought prior to taking any action.
Edward Grant, comments on the ONS impact of increased cost of living statistics.
Commenting on the ONS impact of increased cost of living statistics Edward Grant, Director Technical Connection at St. James’s Place, said: “The statistics remind us of the fragility of many people’s finances, with 55% of renters unable to cover an £850 unexpected necessary expense.
“Under 35’s are utilising more credit than last year. This age group have also incurred significant student debt, and all combined, the lack of financial resilience is making it harder for them to become home owners as interest rates rise, which will depress future UK growth.
“For some families intergenerational wealth transfer will over time boost the younger generations financial resilience. The need for a robust approach to financial education is central to tackling future vulnerability.
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To support people through the cost of living crisis SJP have teamed up with Laura Rettie, personal finance journalist, to offer a free podcast series, Resilience in a changing word, full of helpful hints and tips. Resilience in a Changing World Podcast | a podcast by Technical Connection (podbean.com)