Achieving real financial empowerment

Posted on: 14th Aug 2023

Traditionally, people might have assessed their financial health by simply checking the balance on their bank account or totalling their amassed level of wealth. In recent years, however, a different measure has emerged which seeks to balance financial stability with emotional wellbeing.

Financial empowerment

This new concept places greater emphasis on goals and developing a financial plan to achieve life’s aspirations; in other words, it’s about people gaining control over their finances rather than their finances controlling them. Achieving genuine financial empowerment does not therefore focus simply on someone’s level of wealth, but on handling that money so it has a truly positive impact on their wellbeing.

A state of mind

In many ways, financial empowerment is about understanding the emotional relationship with money by focusing on an individual’s mindset as well as their finances. Taking time to strategise, by aligning spending and savings commitments with long-term goals while being prepared for life’s unexpected financial challenges, can provide a logical, ordered approach that brings satisfaction and pride to our financial lives. In effect, it creates control that affords a sense of financial freedom and thereby puts us on track to a fulfilling, well-lived life and retirement.

Empowerment versus income

Analysis 1, which compares people’s emotional experiences with their level of empowerment and earnings, offers further valuable insight. It found that
financially empowered people had mostly positive experiences, even those in lower income brackets, while those who felt disempowered were generally less happy with their finances than their peers. This suggests that a sense of personal power rather than someone’s income level is the key to achieving emotional wellbeing in their financial lives.

It’s all in the planning

Financial empowerment effectively derives from equipping ourselves with the right tools. With the clear, transparent advice and professional support our firm provides, we can construct a well thought-out, long-term but flexible plan that will allow you to live the life you want and thereby achieve true financial empowerment.

1. Morningstar, 2023

IF YOU WOULD LIKE ADVICE OR INFORMATION ON ANY OF THE AREAS HIGHLIGHTED IN THIS NEWSLETTER, PLEASE GET IN TOUCH.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

It is important to take professional advice before making any decision relating to your personal finances. Information within this newsletter is based on our current understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Taxation depends on individual circumstances as well as tax law and HMRC practice which can change.

The information contained within this newsletter is for information only purposes and does not constitute financial advice. The purpose of this newsletter is to provide technical and general guidance and should not be interpreted as a personal recommendation or advice.

The Financial Conduct Authority does not regulate advice on deposit accounts and some forms of tax advice.

All details are correct at time of writing – June 2023.

HNWIs cutting pension contributions

Research has highlighted that in an effort to alleviate daily financial pressures, including rising mortgage rates, one third of high-net-worth individuals (HNWIs) have reduced their
pension contributions or intend to do so in the next six months2. Those with assets of £250,000 plus are more likely to have reduced their pension contributions in the last six months (14%), versus 9% across the UK population as a whole.

Those HNWIs who have already taken steps to reduce their pension payments have done so by an average of £1,246 a month, nearly £15,000 over the course of a year. Over eighty percent (84%) of HNWIs are already experiencing or expecting an increase in their mortgage rates
to put a strain on their cashflow, prompting many to reduce their pension contributions.

"Those with assets of £250,000 plus are more likely to have reduced their pension contributions"


Interestingly, the research has also shown that the majority of HNWIs are underestimating the requirements for a comfortable retirement, believing on average that a pension pot around £580,000 will do the job, but in reality a pot of nearly £700,000 plus the full State Pension will suffice, according to the research.

2. Saltus, 2023