Cautious optimism over 2022 dividend growth
A recent report1 has revealed a dramatic rebound in UK dividends in 2021, increasing 46.1% last year to total £94.1bn. This figure was boosted by a record £16.9bn in special dividends, three times the normal level. Special dividends are non-recurring and usually larger than a typical dividend payment. For 2022, the report expects underlying growth of 5% to bring total payouts to £81bn, with banks and oil companies expected to be the main contributors. Expectations are that special dividends are likely to be much lower this year. Despite headwinds such as inflation and new COVID variants, Managing Director of Corporate Markets EMEA at Link Group Ian Stokes believes, “The recovery in UK dividends is not complete, but the easiest part of the catch up is now behind us… As the pandemic continues, it would be easy to take a knife to our expectations for dividends for the coming year. We are, however, cautiously optimistic that most sectors can deliver growth.”
Huge numbers risking a double tax hit on their pension
Data from the Financial Conduct Authority2 shows that the number of pension pots accessed for the first time in 2020/21 totalled 596,080; the number fully withdrawn totalled 341,404. Only 33% of consumers taking money from their pension for the first time took regulated advice. People cashing in pension pots without taking advice could be putting themselves at risk of paying more tax, and those cashing in pots in one go could pay up to 45% Income Tax on part of their withdrawal, while also losing Inheritance Tax protection.
1Link Group, 2022
2FCA, Dec 2021
It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. If you withdraw from an investment in the early years, you may not get back the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency.
Information is based on our understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.
Tax treatment is based on individual circumstances and may be subject to change in the future.
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