Financial Planning - Three Key Themes For 2025

Introduction

Given the backdrop of economic and political uncertainty over the last few years, it is encouraging to see more and more people looking to take control of their own financial destiny by putting in place a financial planning strategy designed to provide them with financial independence.

As we start 2025, I thought I would highlight three key themes that we are looking out for over the course of the year.

Theme #1 - Estate Planning

We very much hope that the government sees sense and looks to amend its proposals to bring pensions within the scope of Inheritance Tax.

Whilst we are not opposed to there being a pension tax charge on death, for example, on any uncrystallised benefits, expecting Pension Scheme Administrators to liaise with Personal Representatives to identify and pay any IHT is far too complex and a recipe for disaster.

Estate Planning is likely to be a key topic throughout 2025 given the Budget announcements and we will be reviewing our client's financial plans in this area.

Theme #2 - Global Economy

2024 was a year of US exceptionalism and many commentators are forecasting a similar scenario for 2025.

The gold rush around AI seems to continue apace and should hopefully bring greater productivity gains - will the dominance of the 'Magnificent Seven' continue in 2025?

It will be interesting to see how the Trump / Musk relationship plays out as well as the impact of Trump's 'America first' policies. The expectation is that there will be significant tariffs on Chinese imports as soon as he takes office and perhaps lower trade tariffs for Central and South American countries as well as for Europe and the UK.

In Europe, there are elections in Germany in 2025 and ongoing political upheaval in France.

On a positive note, perhaps, we may see an end to the war in Ukraine - how this will play out is uncertain at this stage.

In the UK, interest rates are forecast to fall during 2025 but the extent and the timing of the cuts is unclear. Many economists are expecting modest growth in the UK economy during 2025 but last years' Budget has had an impact on business confidence.

As our clients know, we remain focused on the longer term by investing in globally diversified, low cost portfolios designed to achieve their financial objectives.

Theme #3 - Sustainability

We think 2025 is going to be an interesting year for sustainability with a potential divergence between the US and Europe / UK in terms of policies and spending on sustainability. Despite the Trump rhetoric, the facts remain:

Globally, 2024 was the warmest year on record and the first year where temperatures exceeded 1.5C.
In the UK, 2024 was the fourth warmest year on record.
Across the world, 2024 saw an increase in extreme weather events and, in the UK, Storms Bert and Darragh highlighted the impact these events can have on households and businesses.

The good news is that, according to the World Economic Forum, 2024 marked a peak in global energy-related CO2 emissions.

We know that many people are wanting their wealth to have a positive impact on people and the planet and this is something that we will continue to focus on during 2025.

Conclusion

As we begin 2025, the need for people to have a clear and coherent financial plan is paramount. The focus has to be on your financial goals and people need a blueprint on how they can achieve these. This will enable you to navigate the economic, political and legislative uncertainties that we may see in 2025.