Gifting to family? Three tips to keep investments working hard

11 October 2022

2 minute read

We explore ways to keep your money working hard.

Who's it for? All investors

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek professional independent advice.

Please bear in mind that tax and pensions laws can change and that their effects on you will depend on your individual circumstances. We don’t offer personal advice.

A third of investors are considering gifting grown-up children cash as early inheritance to help them make ends meet through the cost of living crisis, according to research from Barclays Wealth1.

Amid warnings from the Bank of England that inflation could tip 13% by the end of 2022, over a third (37%) of parents of 40-year-old millennials now anticipate gifting inheritance this year, said the study.

It showed that the money being gifted is intended to help children more with immediate living costs, as opposed to big-ticket purchases like property.

Crucially, more than half (58%) expect to fund the support for their children by dipping into their retirement pots, which will eat into capital earmarked for later years.

For those who are not confident they will have enough to support their whole retirement, 32% said they are worried about not having the funds to mitigate inheritance tax, and 31% are worried about not having enough to pass on to their children or grandchildren.

While helping family is a priority for many, it’s important to make sure the remainder of your money is working as hard as possible to maintain your required standard of living in retirement and/or to pass on to loved ones.

Here are three tips to ensure your investments are working hard:

1. Use your review wisely

Reviewing your portfolio is an important component of being a DIY investor, that is, one who makes their own investment decisions. To help manage finances, four in five (83%) in the study admitted they have increased the frequency of reviewing their investment portfolio in the last two years, with one in four (28%) doing so once a month, and one in five (22%) doing so every 2-3 weeks.

Experts recommend an annual review of your ISAs and pensions to see whether they’re on track and if not, why not. All long periods of underperformance start with a short period of underperformance. Keep an eye out for funds that are consistently underperforming and not just struggling because of the recent downturn.

2. Check your balance

Markets and asset classes don’t all move neatly in line, so over time your exposure to different investments will change. This could mean your portfolio could end up in a different risk category. If necessary, you might take steps to rebalance. This could mean selling out of some of the funds that have earned you decent returns and topping up elsewhere – or buying up some new opportunities.

3. Are you diversified enough?

Diversification has always been key to a long-term investment process. Ideally you’ll have a decent spread of assets across regions and industries. If you’re not sure about getting the mix of investments right, consider Ready-made Investments – a range of funds which are selected and run by a Barclays team of investment experts, giving you access to balanced investment portfolios with different levels of risk. Simply choose from one of five funds based on the level of risk you feel comfortable with, and leave the rest to the professionals.

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The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances.

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