Have poor dividend payments affected your savings and investment plans?

The economic uncertainty resulting from the pandemic is likely to manifest in various ways over the next few years. One area that we already know has been greatly affected and for which some may even say the timing of the pandemic was ‘advantageous’ from major companies’ perspective, is that of dividend payments.

During 2020, many companies decided the time was right to make the move to cut or completely shelve dividend pay-outs. This was possibly on the cards for some time but was prompted by the Bank of England’s decision to effectively stop all the major UK banks, including those mainly focused overseas, from paying out on almost £8bn worth of dividends and shareholder payments.  

This resulted in UK dividend payments being far less satisfactory than those on a global scale, where during the latter half of the year 12% of global companies cancelled dividends with a further 22% cutting them. The latest edition of Janus Henderson’s Global Dividend Index highlighted the difference between the global and UK figures, with UK seeing a much higher cancellation rate from 32% of companies, in addition to 23% cutting payments altogether.

For UK investors, it was the decision from the Bank of England so early in the year that meant the major impact was felt with any unpaid 2019 final dividend payments, which are usually the highest of the year. The third quarter of 2020 was not much more positive, as UK dividends saw the lowest fall for that period since 2010, in excess of 49%.

Additional impact was felt with the oil prices hitting new lows, following which Royal Dutch Shell and BP, the UK’s largest oil multinationals, both drastically slashed their quarterly dividends. Both had previously held positions in the top three for overall value dividend payers between 2016 and 2019, so this decision affected many income funds heavily.  

Although some businesses have resumed dividend payments, there is still a question of doubt over dividend pay-outs overall for 2021. It is still too early to say whether dividend payments will reach the same levels as anticipated prior to the pandemic, and any change will remain sector dependent.

But, if there is one thing the pandemic continues to remind us, it is that nothing in life is guaranteed. We simply cannot rely on what was once thought to be a ‘given’ and should not rely on one form of investment or income channel.

If you have been impacted by the poor dividend payments, perhaps broadening your investments may reduce your future risks.

How expert financial advice can secure your savings and investments in 2021 and beyond

Of course, for many of us the main aim of investments is to create an alternative form of income. A nest egg for our families, to ‘protect’ or secure a retirement fund, or just to build a pot of money for additional spending.

Those who once relied upon the old-style share save schemes, dividends and shareholder pay-outs will already know that confidence and reliance in one financial area alone is not recommended.

This is where our expert financial advice can help your future financial planning through 2021 and far beyond.

The value of any investment and income from it can go up or down, and you may not necessarily redeem your initial investment. But by spreading the risks and seeking professional advice and guidance for an investment portfolio, rather than investing in one business or basing your decisions on past performance alone, you are putting yourself in a much more promising position.

More stark realisations have been felt because of the pandemic. But a Standard Life report released mid-April revealed that a shocking 66% of 2021’s retirees risk having insufficient pension savings to sustain their planned retirement income and anticipated standard of living. A nationwide pension gender gap remains, with women being in the more unfortunate position of having an average pension pot value of up to £16,000 less than the male retirees – with 25% admitting that they will continue to work part-time as a buffer to help them through their retirement.

Banks may have been released from the dividend payment halt, but they are still capped. And there is still no guarantee that bank dividends will reach previous levels. So, our best advice is to spread your opportunities and risks. And try to avoid being in the pension predicament when it comes to your retirement planning.

Get ahead with your 2021/2022 Lifetime ISA allowance!

Part of the financial planning service here at Simpson Financial Services is to monitor all financial markets, and to create a bespoke, tax efficient portfolio for each of our clients, meeting your requirements and risk strategy attitude.

Retirement planning has been covered within a recent blog, but if you are within the category of 18 to 39 years of age, you could set up a Lifetime ISA as a flexible savings option, and an ideal investment, to complement a pension.

One of the real benefits of the Lifetime ISA is an additional 25% from the government of up to £1,000 per year. If you can contribute the maximum £4,000 each tax year, your savings will continue to grow for as long as you pay in (up to the age of 50), as part of your £20,000 annual tax-free allowance.

Our Independent Financial Advisers can provide you with more detailed information about the most appropriate ISA for your individual portfolio, and even how to manage it.

With various other options for savings and investments though, and access to market leading technology, we not only assist in setting up your portfolio, but we also continue to monitor its performance. We can keep you up to date with the markets and recommend changes to benefit your investments, really making sure your money continues to work efficiently and effectively for you.

Don’t let another dividend payment drop cause you a dilemma!

In summary then, no single form of savings or investment is 100% guaranteed to reap the rewards every time. But Simpson Financial Services will ensure that any future dividend payment drops don’t leave you in a financial predicament. Whether you are already an experienced investor or are looking to start with even the smallest plans, our independent advisers are ready to share their specialist knowledge with you in every field of savings and investments, mortgages, and retirement planning. Contact one of the team today to start planning right away.