Important information - the value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

WITH the holiday season in full swing, you might think nothing much - financially speaking - is going on. Not so.

Whether you’re lying by a pool, or wishing you were, here are five charts to show what’s piqued our interest this week. It’s a bit of a mixed bag - from pensions to oil and Tui to Inheritance Tax. But we hope you find something that strikes a chord with you too.

1. How much!? What the spiralling price of oil means to us

If you’ve heard that the price of Brent crude hit $87.55 this week, up by more than $15 since the end of June, you might be rushing to refuel your car and wondering why such a large rise. Chiefly, it’s because supply is being cut. Saudi Arabia announced that it will extend previously announced production cuts until September. It will pump just 9 million barrels a day compared with 10.5 million earlier in the year. The rising oil price also reflects greater confidence that the US can achieve an economic 'soft landing', avoiding a recession which would reduce demand for energy.

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Source: Refinitiv from 30.12.22 to 9.8.23 in US$ terms.

2. IHT vs CGT - what’s costing taxpayers more?

Few taxes stir up negative feeling like Inheritance Tax. Besides the fact that it affects those who have lost someone close to them, IHT is perceived as being a double tax - a tax on taxed money, perhaps as income or as a capital gain. The so-called ‘death tax’ is the subject of regular campaigning for its reform, or even removal altogether, despite the fact that relatively few people pay it.

Capital Gains Tax, by contrast, does not enjoy the same notoriety, perhaps because it is seen as a tax more explicitly aimed at the rich.

Yet a simple comparison of the money raised by each tax reveals it is CGT that is most costly to taxpayers overall - and it’s not close. We used HM Revenue & Customs data to build this chart, showing that CGT has raced ahead of IHT in terms of the money it drags in for the government. Read our full analysis here.

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Source: HMRC. IHT receipts taken from HMRC tax receipts and NI contributions for the UK, 21.7.23. CGT receipts taken from HMRC Capital Gains Tax Statistics, 3.8.23.

3. State pensions to cost more than education, policing and defence combined

The UK will spend more on the state pension in two years’ time, than on education, policing and defence combined, The Times said.

It is due to the ageing population but also because of the “triple lock”, a mechanism that raises the state pension by the highest of average earnings, inflation or 2.5%.

Last year, pension costs surged from £104 billion to £110 billion with experts warning it was becoming “unsustainable”. Both political parties have committed to keeping it until 2030. 

Former pensions minister Baroness Ros Altmann has suggested a “double lock” (no 2.5% guarantee) and to raise the number of years of national insurance contributions that qualify you for a pension, up from 35 to 45.

It seems wise for pensioners of the future to plan for a world of no triple lock.

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Source: OBR.

4. A lousy British summer sees travel stocks take off

The sun doesn’t always shine on Tui, but the tour operator has had its first profitable third quarter since the pandemic and looks set for a good summer. The 5.5m holidaymakers who travelled with Tui in the three months to the end of June, pushed group revenue up 19% to €5.3bn. The 2023 holiday season hasn’t been without its challenges, but sun-seekers are a determined bunch and Tui says bookings for the last week were up 5% against summer 2022. The financial impact of the wildfires will inevitably last far longer though, adding around €25m to Tui’s full year 2023 costs. Longer term, the fortunes of tour operators, in the face of DIY holiday booking, is perhaps summed up by Tui’s five-year share price performance.

Tui share price (pence)

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Source: Fidelity, 10.8.23.

Past performance is not a reliable indicator of future returns.

5. The decline of the mortgage borrower

The Halifax price index this week showed that the average price fell for the fourth consecutive month. But beyond the headlines it’s worth looking at what’s happening with the underlying ownership of property. As shown in this chart, compiled by Fidelity analysts, the number of households who own their property lock, stock and barrel has risen from 24.7% to 34.8% over the last thirty years. On the flip side, those buying with a mortgage have declined from 42.8% to 29.5% during the same period.

It is to be expected with the post-war population bulge of Baby Boomers steadily clearing their mortgages, along with older Gen X homeowners. But the chart neatly captures the extent of the trend.

As for the rental market, social renters have declined while private renters have increased. Unsurprisingly, estate agents are responding by focusing on rentals1. Rents are rising at their fastest annual pace since 2016, according to the Office for National Statistics.

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Source: Fidelity International, English Housing Survey, 15 December 2022.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

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