Looking back at my end of year message to clients a year ago, we were still to face the most testing period of the pandemic and the UK was just days away from leaving the European Union.

Despite these substantial challenges, 2021 has been a year when the markets have shown remarkable resilience and investments have held up.

Almost across the board, client portfolios have largely weathered some of the most turbulent economic times we can remember.

Of course, we are by no means out of the woods yet, especially with the latest Covid variant, Omicron, bringing some renewed restrictions as we approach the second anniversary of the outbreak of the global pandemic.

Overall though, there is unquestionably a more positive outlook than perhaps we could have hoped for this time last year.

There are even murmurings that the Chancellor Rishi Sunak would like to introduce some tax cuts at some point in the near future, although it is hard to see how this can be achieved just yet when so much work remains to be done re-balancing the books after the cost of navigating our way through the economic storms of the pandemic.

As we prepare to enter the New Year, the team at Phillip Bates & Co Financial Services will be continuing to monitor financial markets and trends, ensuring that we are able to advise of any measures that need to be taken to ensure our clients’ portfolios are fully protected and in the best possible position in both the short and longer term.

In recent newsletters, I have commented on concerns regarding rising inflation and the potential increase in interest rates. Thursday saw the Bank of England increase the rate to 0.25%, taking the view that action was now needed to combat inflationary pressures. We will continue to track the implications of this and further changes closely.

Despite the recent rise of Omicron, we have taken the decision to continue to work from the office. We know from our packed diaries that being able to meet with us again in person at our Neston office is something that many of you have appreciated. We will, of course, notify you should this position change over the coming weeks.

Finally, it remains for me, on behalf of all of our team, to wish you and your families a Happy Christmas and a Healthy and Prosperous New Year.

We look forward to meeting up again in 2022.

Our office will be closed between 24^th December and 4^th January.

The Government has made a series of important announcements this month as it seeks to address the two biggest issues in its in-tray – the need to start paying down the debt incurred as a result of the pandemic and, secondly, the social care crisis.

The requirement to tackle how social care is funded has challenged governments for years, but on becoming Prime Minister, Boris Johnson made it a key priority.

The plans he has announced will limit the amount people pay for their actual care (rather than accommodation) to a maximum of £86,000 over their lifetime from October 2023. After this cap has been reached, the costs will be picked up by local authorities.

Anyone who has assets under £20,000 will have their care costs covered in full by the state.

Those with assets between £20,000 and £100,000 will be expected to contribute to their costs, but will also get some support from the state.

The changes will be funded in a number of ways:

• From April 2022, National Insurance (NI) will rise by 1.25%;
• From April 2023, this extra payment will become a separate tax – called the Health and Social Care Levy – on earned income. It will show up separately on payslips;
• The levy – unlike NI – will also be paid by people who continue to work beyond retirement age;
• Shareholders will also have to pay 1.25% more in tax on the profits they make.

The Government says the changes to NI will cost £255 a year for someone earning £30,000, and £505 a year for someone on £50,000.

The increased NI contributions are expected to raise an extra £12bn a year which, for the first 3 years will go towards easing the NHS backlog before being switched to social care.

What the Government has not addressed is the way in which care is delivered.

One of the areas where we have been most busy during the pandemic has been around future planning.

While it is clearly integral to all of the long-term planning that we carry out on behalf of clients, there is no question that the seismic events of the last 18 months have led a good number of you to reflect on your work, life and family priorities.

We always tell our clients that our primary objective is not to help you save money – it is about enabling you to achieve your financial objectives both pre and post retirement.

During recent months, we have definitely noticed an uptick in clients wanting to move home, extend their current properties and purchase second homes in the UK and abroad (including as a holiday let to provide an additional income stream).

There have also been plenty of discussions around retirement options with several clients wanting to investigate potential options to either bring forward their retirement or sale of business or, in some cases, to move from full-time to part-time work.

During the crisis, the majority of us have spent more time at home, taken up new hobbies and interests and been able to reflect on the things which are most important to us. It’s also reminded us all of our own mortality which has led to an increase in the number of conversations about inheritance tax planning, wills and Lasting Power of Attorney documents.

The last year and a half has shown more than anything the importance of having a long-term, robust and diversified financial plan, which ensures that our clients weather once-in-a-generation events like the pandemic in the best possible shape.

This means that the kind of conversations outlined above take place from a position of strength and are aligned with the longer-term objectives that are built into every client’s individual plan.

There has been a lot of positive economic data circulating over recent days.

The pound touched a three-year high as reports showed that British manufacturing grew at its fastest rate in almost 30 years, while house prices have risen at their fastest pace for almost seven years.

Alongside this, we have seen far less volatility in the markets than was the case a few months ago with increasing confidence in the UK’s roadmap out of the Coronavirus pandemic.

Over in the United States, it’s a similar story with consumer prices jumping by 4.2% in the year to April – the biggest increase in almost 13 years.

Other stories to emerge include Travis Perkins, the UK’s biggest builders’ merchant, raising the price of some of its products by between 5 and 15%, while many restaurants have also been increasing the cost of eating out as one of the worst-hit sectors seeks to recover lost ground.

All of which inevitably leads to concerns that we may be heading for a period of higher inflation.

Only time will tell, but my instinct and that of many other commentators is that there may well be a steady increase in inflation over the next 18 months or so as we continue to emerge from this most extraordinary period in all of our lives.

But any upcoming inflation is likely to be temporary and there should not be a need to use interest rates to control any upward pressures.

The Bank of England view is that inflationary pressure may prove lower than some may expect with the strong possibility that the economy will cool after the initial post-lockdown surge in spending.

Of course, for some investors, inflation can have benefits, particularly for holders of assets including houses and some commodities such as gold.

We are currently reflecting some of the changing economic and financial circumstances in our client portfolio review letters.

While we are pleased with how well portfolios have held up, we are also signposting that there may be a need to consider a few different options to ensure that our clients are best able to mitigate any inflationary challenges and threat of rising interest rates.

As chartered financial advisers, you would expect us to track closely the ebbs and flows of the financial markets and to try to read the road ahead.

But our responsibility to our clients is to ensure that they have the strongest, most robust, long-term and diversified plan which will, over a period of time, enable them to achieve or exceed their financial objectives.