I find these days that the worlds of estate planning and retirement planning overlap more and more. None of us have a crystal ball as to what is going to happen in the future, and planning anything ahead of time always includes elements of extrapolation, interpretation and preparation.
This was particularly true for one of our social media team who got a message from a friend saying she had contracted COVID along with a selection of her relatives.
The problem was that this was just 10 days before the friend's wedding.
Being a conscientious friend, and mindful that many like herself had aging and elderly parents, she forewarned all guests. That enabled them to weigh up the risks of attending a wedding and reception with previously ill relatives who hopefully would be clear by the Big Day. Guests could choose to duck out entirely, just go to the church, or go the whole distance of church and reception with shared transport in between.
The good news was that everyone tested negative, and the wedding went ahead as planned on a beautiful autumn day.
Weddings and planning
So, what's the link? Being forewarned and being able to be prepared are not necessarily the same thing. You can prepare for multiple scenarios in your estate or retirement planning, and indeed everyone should, but it's not the same as being forewarned directly of a curveball.
That's why the pre-announcements by Chancellor Rachel Reeves are unusual - we know a curveball is coming. However, the lack of detail makes the only certainty that there will be a curveball due to the government's announcement of a £20bn shortfall. That's not much to go on, but it's something.
Fact and conjecture
In an article for the BBC Indepth website, Evan Davis sorted through the rumours and possibilities to come to an interesting analysis.
“When it comes to squeezing more tax out of a population, there are two broad approaches a chancellor can take. We might call them the expedient and the economic.
- The expedient is to search for places where you can raise money with a minimum of squealing. On this approach, there doesn't have to be much logic to any tax rise - it's just about finding the money in hidden corners.
- The economic approach is slightly different. It starts with the idea that there are more and less logical ways to tax people, and that the tax system should avoid picking on certain types of activity in arbitrary ways.
- (To achieve this) you need to have a vision for how all the pieces of the tax system interact.”
This is the real skill in estate planning; taking that holistic overview of how every piece of your estate planning interacts, and working out what needs to be overhauled, tweaked or updated.
The likelihood is that any changes announced in the forthcoming Budget won't impact all of your estate planning pieces. It may nibble at the edges of some, and perhaps take a sideswipe at a few more. However, it's unlikely to directly reduce the value or suitability of the majority of estate planning provisions you have made.
How much is £20bn in the scheme of things?
It's also important to recognise the role of 'spin' and hype involved in these announcements. £20bn is a lot of money, but as Davis points out in his article, it equates to:
- “About £6 a week, for every man, woman and child in the country / £25 each week for a family of four.
- Enough to keep NHS England going for about 40 days a year.
- Less than 1% of our annual national income.
- About 1.7% of total government spending.”
As Davis says:
“It's not revolutionary, but nor is it nothing.”
Most people would probably say the same about their estate planning and indeed their net worth. It's not anything special, but it is significant. Whatever the value, it needs to be protected.
How Panthera Estate Planning can help
If you have any concerns about your estate planning, contact me. As a former financial advisor with decades of experience in estate planning, I can offer that holistic overview. We can discuss what looks solid, what looks less stable, and what Ms Reeves might take a chance at changing.
Of course, that last element is largely guesswork, but it is also informed guesswork based on what the Chancellor has available to alter, and how she might change things within that portfolio. In other words, she's doing estate planning for the nation!
If you would like to discuss your estate planning, I'm here to help. Just contact me and book your complementary 30-minute Discovery session to discuss your situation and requirements.