The ten cheapest funds on FundCalibre
The active vs passive investment debate has divided the investment world for years, with proponents...
For those who just see it listed on their pay slip, but are not sure what it is, National Insurance is a tax on our earnings. It’s paid by both employees and employers (the self-employed pay it on their profits) and it funds services including the NHS; maternity, sick and bereavement pay; and the state pension. Over the years, an aging population has put a strain on this pot of money, because more people are taking from it than contributing to it. Then, of course, along came Covid-19, compounding the problem.
The tax increase announced this week was possibly inevitable but has been accelerated because we need to take the strain off the NHS and also fund social care which has become a huge financial burden for many.
There are concerns, however, that the increase will have a higher impact on the lower-paid, or those living pay cheque to pay cheque. The tax will be progressive, meaning those who earn more will pay more, but it’s not entirely linear.
For example, people earning £30,000 will pay £255 more, people earning £50,000 will pay £505 more, people earning £80,000 will pay £808 more and people earning £100,000 will pay £1,130 more.
We can’t avoid the tax rise, so the best option is to be proactive with our finances. Prepare your budget – and your brain – today for a lower pay cheque next April when the increases come into effect.
If you’re able to, consider investing more. The stress on benefits and the state pension will likely continue over time, so it’s on you to invest more of your own money to make sure you have a comfortable retirement. Investigate your workplace pension and any matched offers available.
If you have time on your side and are looking for growth opportunities in your portfolio, you could consider the Scottish Mortgage Investment Trust. It focuses on finding tomorrow’s winners and has returned 1,013%* over the last 10 years, turning £1,000 into £11,135*. The Marlborough UK Micro Cap Growth fund is another option and invests in firms with disruptive technologies or companies who are leaders in niche markets.
You could also consider investing in the long-term trends that are shaping our world. The AXA Framlington Global Technology fund is a clear play in this space, with a manager who has specialised in technology stocks since 1998. A different approach could be Guinness Global Innovators. This fund looks to invest companies benefiting from innovations in technology, communication and globalisation.
For those investors wanting to make the most of reinvesting dividends, or those who are closer to retirement and are looking for a fund that generates an income, VT Momentum Diversified Income with a current yield of 4.85%**, or The City of London Investment Trust, which has raised its dividend in each of the past 54 years, are worth a look.
*Source: FE fundinfo, total returns in sterling, 8 Sept 2011 to 8 Sept 2021
**Source, FE fundinfo, 9 Sept 2021