Stock market highs, a bleak Budget and watercress panna cotta

Trump invaded the airwaves this week. I’m clearly raising political animals – the conversation at home has been about the menu at the state banquet. When I explained watercress panna cotta to my son (I didn’t even get as far as the quail eggs), his view was that this sounded ‘rancid’ and fish and chips would have been better. I suspect Trump may have agreed.

We need investment in the UK and if we need to wheel out horses and hats and carriages to get it – I’m all for it. I’d put a bearskin on and march around if there was a £ billion cheque at stake. In a flashing Union Jack bikini with tinsel. But let’s not go there.

Microsoft and Nvidia have committed about £23 billion to build new computing facilities in the UK over the coming years. You just wonder how many watercress panna cottas they got under the table in return? And as the Federal Reserve in the US announced an interest rate cut, stock markets rose to record highs as traders took a glass half-full approach, ignoring poor jobs market data and focusing on promises of higher tech investment spending and more rate cuts to come. So far, so good.

But this American jollity comes against a backdrop of poor economic news closer to home. Government borrowing is at super high levels – they borrowed a blistering £18 billion in August, spending this much more on public services than they took in taxes. They pay interest on this debt so holding interest rates at 4% (as the Bank of England did yesterday) is a blow to the Exchequer. You can read the latest on what this rate freeze means for savings, mortgages and pensions.

Here come higher taxes…

The inevitable conclusion is that taxes will rise in November’s increasingly dark Budget, which will be a tough day for Rachel Reeves and most households in Britain. We can see the double whammy of the cost of living and squeezed take-home pay after tax in people’s behaviour. So, how are we responding to the threat of yet higher taxes?

Inheritance Tax fear

It’s tough to know what to do when it comes to Inheritance Tax (IHT), other than to go on a massive spending spree. Data out this morning from HMRC confirmed the steady and ongoing increase in Inheritance Tax – they took in £3.7 billion in the first 5 months of the tax year, up by £0.2 billion from last year. This is a complex planning issue and one where I think financial advice will pay for itself in most cases.

ISA stuffing

We’re also shielding money from tax with ISAs. New data shows that annual amounts paid in have hit a 13-year high. Driving demand is the Cash ISA, as people took advantage of relatively high interest rates and these tax-free accounts. Nervous people, worried about cuts to ISAs or tinkering with the rules, stuffed £70 billion into Cash ISAs and £31 billion into Stocks & Shares ISAs. Lifetime ISAs (helpful for those under 40 saving for a first flat or retirement) hit a new high of £2.3 billion paid in.

And hitting the brakes on pensions

Pensions – the best way to boost any savings we can afford to set aside for the longer-term – are also being hit, as people prioritise today money over turbo-charged tomorrow money.

In part, this will be because older savers have said “Stuff that” as pensions will be included in Inheritance Tax from 2027. The endless moving goalposts are of course destructive. Recent stats from the regulator confirmed an unprecedented rush by pension savers to access their 25% tax-free cash, withdrawing £18 billion in the last financial year amidst concerns about IHT and rumours of a change to the 25% tax-free lump sum rule. If you’re retired and concerned by the headlines, this guide highlights some of the biggest financial mistakes in retirement – and how to spot, plan and avoid.

Another reason for falling contributions is that it’s a seemingly easy thing to cut back on as costs bite. I know it’s easy for me to sit at a keyboard and write, but if you can avoid opting out of any workplace pension, and (younger readers) just start with paying in £20 or £30 a month – it’s so worth doing. You can see our 2025 Best Buy pensions. Of these, AJ Bell, Fidelity, Hargreaves Lansdown, interactive investor and PensionBee allow minimum contributions of £25 a month or less for regular direct debits.

One sensible thing to do if you're employed is to have a look at how much is in your workplace pension. At least get familiar with it. Dig out your statement. Have a look. Identify where it is. We’ll help you work out if you’re in a decent scheme and ask if your savings are being invested the right way. And you can see how others rate your workplace pension provider here.

Have a great weekend, everyone. I have started my winter swimming again. Target – 6 times a month for the next 6 months. The sea was a balmy 19 degrees this morning, better than the 7 degrees it will be in February. Gulp. I’ll need a thermal Union Jack bikini for that.

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