Lowes Magazine 122

Issue 122

“Life is a succession of lessons which must be lived to be understood.” Ralph Waldo Emerson

INSIDE TRACK

Sharp increase in scams LATEST FCA FIGURES SHOW A RISE IN THE NUMBER of scams over the past year, particularly those around cryptocurrency, posing a significant risk to investors. The FCA’s Supervision Hub reported a 14% increase in cases on the previous six months, while reports to the ScamSmart website jumped by 49%. In addition, the FCA said it had opened over 300 cases relating to potential unregistered cryptoasset businesses during this period, many of which are likely to be involved in scams. Uncertainty in the markets and investors’ concerns about returns create a scammers playground. Scammers are very adept in their ‘sales’ techniques. Please be wary of any cold calls and adverts on social media – a Government’s Online Safety Bill is addressing the latter, but personal vigilance is still the best defence against criminals. Also, the Financial Services Compensation Scheme has produced a useful podcast which talks about how to avoid scams and the hazards of high-risk investments. The link to the podcast is: https://www.fscs.org.uk/news/podcasts/ episode4/ And please remember, as FCA authorised, Independent Financial Advisers, Lowes is here to help you invest through all market conditions and avoid any potential traps. Putting wealth to work BANK OF ENGLAND DATA SHOW 28% of households boosted their savings due to restrictions imposed during the COVID-19 pandemic. Analysis from behavioural finance experts Oxford Risk, shows individual households are holding nearly £21,000 of savings in addition to regular savings. But savers are losing returns because they are holding the money in cash accounts, often paying paltry rates of interest. Worst still, rising inflation is eating away at the buying power of their savings. Often, this is because they are uncomfortable with the associated risks of investing over saving. As Lowes clients will know, there are clear ways to help mitigate investment risk, including a long-term view of wealth accumulation. If you know anyone who has accumulated additional savings who would benefit from Lowes’ Independent Financial Advice, please put them in touch on 0191 281 8811

Lowes TAX tables booklet ENCLOSED WITH THIS ISSUE OF the magazine is our yearly tax table booklet, covering the tax year 2022-2023.

You can order further copies for family, friends and colleagues by calling 0191 281 8811 or email Contact@Lowes.co.uk

Property ladder help PROPERTY PRICES HAVE continued to rise over the past two years, despite the impact of the pandemic, making it even harder for the younger generation to put their foot on the first rung of the property ladder. This is making younger people increasingly reliant on inheritance or cash from parents and grandparents to make the move from parental home or renting to their first home.

For younger people who are relying on inherited wealth to buy a property, inheritance tax (IHT) is an issue. Despite the £325,000 nil rate band IHT allowance (which hasn’t changed for thirteen years and is frozen until 2026) and the additional £175,000 residential nil rate band allowance which enables the value of a home to be passed on to a ‘direct descendent’, an increasing number of families are recognising the rising threat of inheritance tax. Strategies for passing wealth down the generations, while not paying an unnecessary tax bill, include pensions, which can be passed on free from inheritance tax, and other gifting strategies.

If this is an issue for your family and you need advice, please call 0191 281 8811 for a consultation.

2 LOWES Issue 122 · Published April 2022 The content of the articles featured in this publication is for your general information and use only and is not intended to address your particular requirements. Articles should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts. Levels and bases of, and reliefs from, taxation are subject to change and their value can go down as well as up and you may get back less than you invested. Past performance is not a reliable indicator of future results.

Covershot: Scenery of Amalfi coast town at Tyrrhenian sea in autumn. Photo: Shutterstock

INSIDE TRACK

A RECENT REPORT FROM THE FINANCIAL services giant Aegon, shows the pandemic has altered people’s attitude to retirement and renewed their focus on health as well as wealth. A spotlight has been put on health and longevity, with a focus on updating of wills and trusts, and the setting up of Lasting Power of Attorney. Also, there has been a rise in the number of people looking to retire early. For anyone thinking along these lines, it is important to plan ahead. Earlier retirement means your retirement pot will have to last longer. This will require long term planning as well as safe withdrawal strategies to ensure the money doesn’t run out too soon. As the economic and market impacts of the pandemic and the invasion of the Ukraine have illustrated vividly, uncertainty can be just around the corner, and that is without the rising interest rates and high inflation which look set to be with us going forward. For anyone contemplating retirement, there is now an even greater need for robust Independent Financial Advice.

Make your money work. Best bank & building society rates Type Amount Provider Renewed focus on health and retirement

Account

Gross Rate

Contact

Unrestricted instant access accounts Online 1 £1 - £15,000

Zopa

Smart Saver Instant Saver

1.00%

www.zopa.com

£0 - £100,000 Atom Bank

0.90% www.atombank.co.uk

Online 1

Fixed rate bonds Online

Personal 1 Year Bond Account 1.80% Fixed Rate – Issue 7 2 Year Fixed Term Savings Account

1.80%

www.oxbury.com

£1,000 - £500,000

Oxbury

Online Online 1

£1,000 -£100,000 JN Bank £1,000 - £2,500,000 Tandem

2.11% 2.20%

www.jnbank.co.uk www.tandem.co.uk

3 Year Fixed Saver

4.22% if FTSE 100 rises / 0% if it doesn’t

Call Lowes on: 0191 281 8811

4 Year Fixed Term Deposit

Structured Deposit £10,000 - £500,000 AA rated Bank

You may also wish to consider Premium bonds offered by National Savings and Investments (NS&I), maximum £50,000. Whilst no guaranteed interest is earned, they do offer the opportunity for tax free winnings which with ‘average luck’ should return 1% p.a. but with the chance of winning £1million. Measures of inflation - The average change in prices of goods and services over a 12 month period to March 2022 Retail Prices Index (RPI) 9% Consumer Prices Index (CPI) 7% Sources: Providers’ websites, Office for National Statistics, www.thisismoney.co.uk, www.moneysupermarket.com, www.moneyfacts.co.uk 07/04/2022. All accounts subject to terms and conditions. Note: 1 This account is run online using a banking App.

Follow us for company updates

@LowesFinancial

@LowesFinancial

Lowes Financial Management

If you would like to receive further information on any of the subjects featured in this issue please call: 0191 281 8811 , fax: 0191 281 8365 , e-mail: client@Lowes.co.uk , or write to us at: Freepost LOWES FINANCIAL MANAGEMENT . Lowes ® Financial Management Limited. Registered in England No: 1115681. Authorised and Regulated by the Financial Conduct Authority.

3 Lowes.co.uk

COMMENT

Making the right decisions IT SEEMS INCONCEIVABLE THAT IN THE THREE short months since the last issue of the Lowes magazine, we are experiencing the effects of an invasion in Europe. The defiance and courage of the Ukrainian people is something to behold, and our thoughts are with all those suffering as result of this war. There has been an inevitable effect on global stockmarkets and individual economies, which is likely to continue, as they each adjust to these events.

investment universe, because for us it is about finding the best investments and putting our clients’ interests front and centre, where they should be. We are also always looking at ways we can enhance our client services. Most recently, we have been developing web and mobile app-based solutions to give clients new ways to see their investments. Whilst as mentioned above we would caution against portfolio watching, if you would like to be amongst the first to access our latest digital solutions, please get in touch. As I write, the inflation figures to the end of March have just been released. At the risk of sounding like a stuck record, I can only emphasise the risk that inflation represents. The traditional measure, the Retail Prices Index, reflects price rises over the last year of a staggering 9%. At a time when money held ‘safely’ in a bank has earned, say 1%, this means that £100,000 of deposit capital is now worth £8,000 less than it was a year ago. Therefore, anything you do in terms of investing, to help lessen this impact on your overall wealth, is a step worth taking. If you know someone who could benefit from Lowes expertise and our unique approach to investment management, we always welcome referrals so please do not hesitate to put them in touch.

I would stress again, that in such times, when it comes to your investments it is important to stay calm and not react to the media hype, but to see the bigger picture, so that no rushed, and potentially regretted, actions are taken. If we look at some of the major events over the past three decades – the 1987 stockmarket crash, the dotcom bubble, the Iraq Wars, the Financial Crisis, and others, we can see that they did not stop good businesses trading and while stockmarkets may have faltered for a short time, they have continued to rise after every event. The course of action that has stood the test of time is to accept that volatility happens and to have in place a solid, sound strategy of investment diversification combined with a longer-term view of wealth building. This is the pragmatic path we encourage our clients to follow to deal with these times and it is no surprise to us that research shows investors who have the support of an Independent Financial Adviser are those that fare better when negative stockmarket events occur. This is because part of our role is to help take any worry away, which is why we have always cautioned against portfolio watching – instead, we recommend leaving investments to do their job of building wealth over the medium to long-term. The breadth and depth of expertise we have at Lowes and the passion of our people to do the very best at all times for our clients, is something of which I am very proud. We are a team now of close to 100 people with a deep and diverse range of specialisms and expertise, all dedicated to providing the best possible service to our clients. Many advice firms limit the investments they allow their advisers to recommend, this is referred to as ‘restricted’ advice. While this can be more profitable for those firms, we remain staunchly ‘independent’ in our approach, spending the time to research across the

Ian H Lowes, Managing Director

4 Lowes.co.uk

LOWES

Andy Preston, Elected Mayor of Middlesbrough with Ian Lowes, Managing Director, Lowes Financial Management. Lowes expands with new office in Teesside

WE ARE DELIGHTED TO ANNOUNCE WE HAVE OPENED a new office in Teesside. The new office is in the prestigious Commerce House building on Exchange Square – on the doorstep of the proposed £34m railway station redevelopment. We have been supported by Middlesbrough Mayor Andy Preston, who has been doing fantastic work in Middlesbrough recently and Lowes is pleased to be part of that transformation while providing superb office space that our clients can easily visit. When we announced our expansion into the Teesside office, Mayor Andy Preston added his support, saying: “We’re building something special in the professional sector here in Middlesbrough and the energy and momentum is becoming tangible. It’s absolutely brilliant to have an established financial company with Lowes’ reputation and standing committing to Middlesbrough. These are exciting times, and we look forward to working closely with Lowes in the years ahead.” Christine Huntingdon, facilities manager at Commerce House, added: “We’re honoured to have a firm of Lowes reputation and prominence move into the building and we look forward to welcoming the Lowes team for many years to come.” This expansion will help us deliver our range of Independent Financial Advice to a greater number of clients in Teesside and surrounding areas, including inheritance tax planning, investment management, pensions, tax mitigation, long term care and other general financial planning issues, helping clients and their families to secure their financial future. Lowes serves clients all around the UK. We have a growing number of financial advisers available to help people make the most of their money and grow their wealth for their financial future. We welcome referrals, so no matter where you are in the UK, if you think we can help friends, family, or colleagues with our personal brand of Independent Financial Advice, please have them call 0191 281 8811 for a no obligation initial call or meeting.

Fantastic Opportunity Lowes Consultant Michael Stowe says: Later this year I will be celebrating 10 years working at Lowes. It’s a milestone that I can’t believe has come around so quickly and I

have to say I have enjoyed every minute of the 10 years looking after the finances of Lowes’ clients.

Over that time, I have watched the company grow organically, adding clients, expanding our capabilities, our expertise and experience and adding to the Lowes teams. Ten years ago, there were around 50 people working for Lowes, now we have close to 100. The next logical step is to deliver the Lowes brand of Independent Financial Advice to more people around the UK, including opening new offices. I am particularly pleased with our new office in Teesside. I have many clients living in the area and to have this local facility is going to be extremely useful. Now I will be able to have consultations in the new office, which will make it more convenient for our Teesside clients and enable me to see more people during the day as well. This is a fantastic opportunity also for me to serve more people in the Teesside area, so if you know anyone who you think would benefit from Lowes advice, please have them get in touch. I or one of my colleagues will be delighted to talk to them.

5 Lowes.co.uk

LOWES

Building for the future

Engaging with new technology will enrich the development of Lowes, both in terms of the opportunity to be more efficient and streamlined as a business and also, in the advice and service that we can provide to clients, including adding to the ways we engage and communicate with our clients. In his role, Andrew will work to understand the things our clients want to see from Lowes - and ultimately be the driving force in implementing these changes. “We are very much aware that some clients will be far more comfortable using digital services, for example. Part of my new role will be to ascertain what clients want from us and how they might want to interact with us in the future whether through the advice we provide or the service they receive,” Andrew explains. “We need to adapt to meet those different needs and I can see the role of the adviser changing as we offer different options for clients.” It is important that when a business grows it does not lose touch with its clients, which is why, Adele says, her role is about enhancement and engagement. “Over 50 years, Lowes has built a strong reputation as a company which provides the best quality Independent Financial Advice for our clients and their families. It’s very important to us that we keep the Lowes ethos and principle of providing financial advice in a way that is personal to each client. A large part of my role will be to help improve our service offering, making it more efficient, more attractive and more valuable to our clients.” In their new roles, Andrew and Adele will be more involved in strategic projects and the development of the business. “We’ll be looking at things from much more of a ‘bigger picture perspective’, seeing where we are as a business and how we get to where we want to be – making Lowes the ‘go to’ company for financial advice,” Andrew says. Adele adds: “We’ll be using our knowledge and experience to help further develop the business strategy for Lowes and, along with the rest of the senior management team, drive Lowes forward to become the best organisation it can be, with the ultimate aim of helping even more people build and maintain their wealth and to do our best to help them realise their life dreams.”

HAVING MARKED OUR FIRST 50 YEARS IN 2021, LOWES is now looking to our next 50 years as a company. Two longstanding members of the Lowes team, Andrew Gardiner and Adele Baillie, have undertaken new roles within Lowes to focus on helping to take us into the next phase of our growth, through which we intend to be recognised as one of the best Independent Financial Advice businesses in the North East, as well as continue to attract clients from around the UK. Andrew and Adele joined Lowes within months of each other in 2006. Andrew joined the company as a Trainee Adviser and subsequently became a Consultant and, as part of our development plans, he was recently appointed as an Associate Director of Lowes Financial Management. Adele joined Lowes as a Marketing Assistant and over the years worked to become Marketing Manager. She has now taken on a new position, where as the Head of Business Enhancement and Engagement, she will lead the expanding Marketing and Business Development teams in widening the Lowes brand externally as well as further improving and enhancing our already excellent service proposition. Talking about our plans for the future, Andrew says: “We want Lowes to be the company of choice for savers and investors whether in the North East or around the UK, as well as solicitors and accountants who need an expert partner to help their clients in their financial planning. “Lowes has always been a forward-thinking company. Developments in technology and the size we are now mean we can look to take Lowes to the next stage in its journey. This will include opening new offices in the North East and beyond, such as our new office in Middlesbrough. That is a very exciting prospect for everyone at Lowes and I am particularly looking forward to being a part of the development and expansion process. At the heart of what we want to do is to build on our client and advice proposition and enhance the experience that our clients receive from us.”

6 Lowes.co.uk

INVESTMENT

AS THE WORLD MOVES ON FROM THE impact of the pandemic, through an invasion in Europe, to greater economic uncertainty, Lowes Consultant Chris Milsom considers the best course of action for investors. What to do in a crisis how did they know when best to reinvest? It would have been the very next day, because from that point onwards their money would have started growing again. But how many people would have taken that course of action – or known to do so? We saw the same kind of response with the onset of the pandemic in 2020. The uncertainty caused by the unprecedented impact

of the new virus, caused people to panic and have knee-jerk responses which will have cost them money because markets quickly began recovering as governments took action. On the other side of the coin, is the question whether people should invest or put off retiring because of uncertainty in the markets. What we must always keep in mind is that markets reflect mass investor sentiment. Logically, the best companies will continue to create value and grow. Keeping your head while all about you are losing theirs is how investors avoid solidifying losses. In the past 15 years we have seen a global Financial Crisis, Brexit, a two-year global pandemic and conflict in Europe – major events that have impacted markets – and yet over time it can be seen that stockmarkets recover from their falls and continue to rise. There have been many stockmarket ‘crashes’ witnessed since the FTSE 100 was established in 1984 at a base of 1,000, yet despite them all, the index has climbed to a high of over 7,500. In addition to the rise in the index, investors also have benefitted from dividend payments, reinvested or taken as income, which have delivered further value over the years. It is this cumulative and long-term trajectory on which we need to focus, which takes into account that with upside inevitably there will be periods of downside. Which is why when we experience these periods of short-term volatility it is important to be clear that financial plans should always be focused on the best longer-term strategic decisions. As advised investors, you are in the best position, as we design the plans and portfolios for our clients with those strategies front of mind, including diversification of portfolios with a wide range of investments across different areas. You can be more sanguine in the face of short-term volatility because many of you will have experienced market crashes before and/or know that as your Independent Financial Adviser we have your back. For us it’s business as usual.

There is little doubt that in terms of the UK economy and our savings and investments, we are facing continued uncertainty. The unprecedented events that have happened over the past two years, exacerbated in Europe by Russia’s invasion of Ukraine, have caused marked disruption to the way we live. There is no doubt there are tougher economic times ahead. Most countries are now facing supply chain issues, inflation is continuing to rise, there is the prospect of central banks instigating a faster increase in base interest rates and the cost of energy is increasing. In addition, there are further pressures on commodities, including gas, oil and wheat, due to the war in Ukraine. All of these will add to the economic issues and affect the cost of everyday living. Stockmarkets have taken hits and with the economic uncertainty, and the tougher decisions this will inevitably engender, stockmarket volatility, which is driven by investor sentiment, is likely to continue. There can be an overwhelming urge in these times is to step out of our investments. This is the natural fight-or-flight mechanism that’s hard-wired into our psychology and subconscious. It can be very hard to ignore. But in times of market volatility, logic over emotion must prevail and time and time again, taking a contrary stance by staying calm and avoiding a knee-jerk reaction has been proven to be the best policy. Investments sold while markets are suffering from the uncertainty of geopolitical events, is money lost both now, as investors could be selling in a market downturn and potentially for less than they paid for the asset, and in the future, as the capital will be gone and so investors will not benefit from any market recovery once more positive sentiment returns. The biggest day of outflows from the markets during the credit crisis in 2008/09 corresponded with the low point of the market. This means more investors sold on the lowest day than at any other point in the two years before that. They exited out of fear but

7 Lowes.co.uk

Growing gender pension gap concerns A GROWING AREA OF CONCERN WITHIN financial services is the gap between what women on average can expect to receive from their pension compared to men. A recent survey found that on average, men over 55 anticipate an annual retirement income of £20,712, while women expect their income to be £14,964. There are many reasons for this discrepancy, including pay inequality and career breaks. Also, worryingly, statistics from the Office for National Statistics reveal that 78% of men over 75 had some form of private pension wealth compared to just 54% of women. Of those with private pensions, men had average savings of £135,700 – almost double that of women at £69,800. What also needs to factored in is longevity – in general women tend to live longer than men. Research by Just Group showed that widowed women aged over 75 outnumber their male counterparts by three to one, while five times as many women are reaching 100 years of age. These figures serve to highlight the need for women to prioritise their long-term financial planning. Exploring options as early as possible, including starting to make pension and retirement provision for themselves, can help create greater financial stability later in life and also to manage the impact of the retirement gender gap. They also highlight the need for careful planning by couples to allow for the possibility that one partner may outlive the other. Women in particular should think about how their income might change if their partner dies before them. They’ll want to understand what proportion of their partner’s pension will still be paid to them or if they’ll have to rely on their own savings and assets. The government’s recent proposals on social care still make it likely that many people will need to allocate some of their wealth to meet care needs in later life. The combined factors of longer life expectancy and smaller personal savings means that women in particular will benefit from a clear understanding of their financial plans for later life. In addition, research by financial services product provider abrdn revealed that women are less likely to seek advice on their retirement plans in comparison to men. Life does not stand still and as with increases in longevity, and the possibility for people to be spending longer in retirement, understanding the implications, financial planning for the future and building a retirement pot are essential for everyone. This is where personalised financial and retirement advice can be invaluable. If you or someone you know would like a financial health check and help in planning for their financial future, our Advisers are here to help. Please call 0191 281 8811.

Managed Investment Portfolios Service Uncertain times is one reason Lowes recently launched our Managed Investment Portfolios service, which offers eight investment portfolios allocated to collective investment schemes, such as open-ended investment schemes (OEICs) and unit trusts run by experienced fund managers. This service has discretionary authorisation, which in layman’s terms means our investment managers can manage the portfolios using their discretion, and so are able to quickly make changes to the investments within the portfolios. Financial advisers usually work on an ‘advised’ authorisation, which means any changes must be communicated and agreed by the individual client before they can be actioned. This can take time to put in place. In times where decisions need to be made and actions taken more quickly, the discretionary model allows that to happen. It also allows our managers to take advantage of new opportunities as they arise. Launching the Lowes Managed Investment Portfolios is another way we have been able to benefit our clients using our longevity and experience in the financial advice market. The portfolios offer a range of options depending on the risk tolerances and specific investment objectives of individual clients. Lowes’ advisers will identify the portfolio, or combination of portfolios, which best suits each client’s appetite for risk, capacity for loss and which most closely matches their investment objectives. The eight portfolios offer options for growth, income or a combination of the two and are managed by our award-winning team. The team will also re-balance the portfolios to ensure asset and individual fund allocations do not drift too far from the original, intended parameters. Once in place the management of the portfolios, including any fund switching, all happen promptly and seamlessly behind the scenes. Best of hands Whether your investments use Lowes’ advisory or discretionary portfolio services, we look to deliver the very best management of your investments, using our many years of experience and expertise, our dedicated investment and support teams combined with our Advisers’ knowledge of your individual financial circumstances and needs. All of which we hope will give you greater peace of mind in uncertain times and help you build your long-term wealth. Please note: No investment is risk free and even the lowest risk investment carries the potential of significant loss in the most extreme circumstances and so diversification is key. Risk tolerance and capacity for loss will be discussed with your adviser before any investment is recommended.

8 Lowes.co.uk

PLANNING

How we help clients

There are some important provisos of which to be aware: the gift must be made on or shortly before the marriage or the registration of the civil partnership; it must be made in contemplation of the marriage or civil partnership; and it is conditional on the marriage or civil partnership taking place. It cannot be made after the marriage ceremony. These figures have not changed since 1984, so are far less valuable than they were – all the more reason we should take advantage of them when we can. There are two general exemptions from IHT, which can also be used to good effect here; the annual exemption and the small gift exemption. The annual exemption allows an individual to gift (to either one person or split between several people) up to a total of £3,000 each tax year, free of inheritance tax. If you do not use your £3,000 annual exemption, you can carry this forward for one tax year. The small gift exemption allows you to gift up to £250 per person (to an unlimited number of people) each tax year. But you cannot use the small gift exemption on top of any other gift to an individual in the tax year. Another useful exemption is to make gifts as part of normal expenditure out of income. This exemption allows you to make a gift out of income you receive as long as it leaves you with sufficient income to maintain your normal standard of living. As there is no maximum amount that can be gifted in this way, it can be very useful, bearing in mind you will need to prove the gift comes from income, is regular and habitual and is not needed for your normal standard of living. These days, making best use of the gifting exemptions available is particularly important given the cost of weddings and civil partnerships, not just in terms of making the day a memorable one but taking steps to avoid a potential and unwelcome inheritance tax bill further down the line. If you or anyone you know needs help with their tax planning around a wedding or civil partnership, or want general financial planning and tax advice, Lowes Advisers are here to help. You can get in touch on 0191 281 8811.

ONE OF THE WAYS WE HELP CLIENTS is in planning for big events in their lives and those of their families, says Lowes Consultant Rob Newton.

Now we appear to be coming out of the worst of the pandemic and the world is returning to some semblance of ‘normal’, many people who have been putting off holding a big event, such as a wedding, will be looking to go ahead with their plans. Weddings are not cheap by any stretch of the imagination and no matter who is paying the bill or contributing to the ‘Big Day’, making financial plans ahead of time is essential. This can also affect inheritance tax (IHT) planning. As unromantic as that may be, it is an area that prudent parents and grandparents need to consider, notably in terms of gifting money to the happy couple. A trend over recent years, with more couples co-habiting and setting up a home together before marriage or civil partnership – and so having all the kettles, toasters and other aspects of home life already sorted – is for the traditional wedding list to be replaced by gifts of cash. It is important to know what gift exemptions and inheritance tax reliefs are available, before making your gift, and what the implications are for money given over and above those amounts. In blanket terms, as long as you live for seven years beyond the date of the gifting, any money given passes out of your estate for inheritance tax purpose. If you die within seven years of making the gift, inheritance tax may be payable on the value of the gift. But there are various reliefs and exemptions that can be used to make the gift IHT free. There are specific amounts which HMRC allows to be gifted to someone who is getting married or entering into a civil partnership. These amounts will depend on your relationship with the recipient. They are: £5,000 to a child. £2,500 to a grandchild or great-grandchild. £1,000 to any other person.

9 Lowes.co.uk

PENSIONS

Pension withdrawal requires careful decisions Be wary of emergency tax on withdrawals Lowes Consultant Gershom Chan says:

ONE OF THE RECORDED RESULTS OF THE PENSIONS freedoms is the opening up of more options for people to consider, which has put retirees under immense pressure to make the right decisions, in particular when withdrawing money from their pensions. For many, it seems, the default after withdrawing money from their pensions is to put it into a cash account. This is fine if needed for a set purchase but with CPI inflation at 7% at time of writing, and expected to rise further during 2022, and cash account interest a fraction of that, as a longer-term strategy the money is losing spending power day-on-day. Even if the Bank of England looks to dampen the effects of soaring prices by increasing the interest ‘base rate’ further from the 0.75% set in March, high and rising inflation is likely to be in excess of any benefit a higher interest rate will give to the value of cash savings. Money is also being removed from pensions to invest in stocks and shares ISAs and into property. While these may offer better returns than saving into cash, removing any money from long term savings in a pension should only be done after taking into account long-term financial goals and capacity. These should include how much risk a person may be taking with their money and the tax consequences of pension withdrawals. Pension holders who may have withdrawn money during the pandemic, to meet their own financial needs or those of relatives, for example, may have found that they have been able to pay less into their pension going forward as a result. In addition, more flexible death benefit arrangements for pensions put in place in 2015 mean that pensions can be the best way to pass on wealth to beneficiaries and so often should be the last asset to be drawn upon when needing income or capital. We would recommend anyone thinking of withdrawing money from a pension only does so after seeking Independent Financial Advice.

A tax system anomaly which has been in existence since the pension freedoms were introduced in 2015, saw pension savers having to reclaim £42 million in over-taxation on pension withdrawals in the final quarter of 2021.

Figures published by HM Revenue & Customs show that a total of £800 million in overpaid tax has been refunded since 2015. The rules mean pension savers can withdraw money from age 55 in small amounts or as a lump sum but while this has created more flexibility around pensions, those who access their pot flexibly for the first time can be affected by an emergency tax code applied to the first withdrawal of the tax year. This is because HMRC view the sum withdrawn in the first month will be the amount that will be withdrawn every month throughout the year and they apply a tax code on that basis. Clearly, an upgrade of the tax system is needed but none is on the horizon so far. This issue is likely to be considerably larger than the published figures suggest, as some people do not realise they have been overtaxed and can reclaim the overpayment. It highlights the importance of getting Independent Financial Advice before touching your pension, both to plan your financial affairs properly and to reduce the risk of your money being handed to the tax authorities unnecessarily.

10 Lowes.co.uk

INVESTMENT

Autocalls standout performers

delivered positive returns (95.7%) – at an average annualised return of 7.37%. The worst performing quartile still delivered an average annualised return of 4.24% per annum; while the top quartile returned 10.31%pa. As discussed in our Autocall Review 2022 the autocall sub sector is dominated by contracts linked to the FTSE 100 Index and these have proven to be even more successful. More than 1,250 such investments have matured to date and of these only 8 across the whole period failed to produce a gain. Had these had the longer maximum possible durations – which Lowes advocates and introduced to the sector through our 10:10 Plan innovation – only one would have failed to produce a gain. The average annualised return achieved by all maturing FTSE 100-linked capital-at-risk autocalls to date was 7.9% The benefits of autocalls were particularly seen in 2020 when the majority of the potential calls / maturities were deferred to the next observation date. As a result, 2021 saw the highest number of autocall maturities in the five years (395). And in 2021, autocall maturities once again delivered strong returns for investors – with an upper quartile annualised average return of 9.69% and lower quartile of 4.88%. With considerable uncertainty still plaguing the markets, using investments which can offer defined returns and can help protect against falls in the market can be used effectively to diversify the risk/return profile and complement the funds and other investments in a portfolio. As with all investments, product selection with the right risk for the investor is crucial and we’re very proud of our proven ability to sort the wheat from the chaff for our clients benefit, as well as the positive impact our influence has had on the wider market. If you would like to read more, our Autocall Review 2022 can be found on our website at: www.Lowes.co.uk/AutocallReview22

STRUCTURED PRODUCTS HAVE CONTINUED TO DELIVER for investors despite the effects of the global pandemic on stock markets, with autocalls in particular, providing strong returns for investors’ portfolios. Lowes has an unrivaled position in the UK retail structured product sector, spanning more than two decades, during which time we have played an influential role in helping to shape it for better investor outcomes. Our significant investment in terms of research and analysis has paid dividends for our clients as well as others who follow our lead. Lowes Investment Department has recently published two more research papers examining the sector. The first is a comprehensive analysis of structured product performance of all products available via the intermediary market that matured over the five years to the end of 2021. This included the two years affected by the pandemic, during which the stockmarket fell by over 30% from high point to low, before recovering again. The second paper reviews the evolution of what has become the most prominent investment offering within the sector – autocalls or kick-outs as they are commonly known. The first autocall was issued in 2003; we recommended that to clients and it, like all but a very small handful of those since, performed admirably. The five-year review tells us that since January 2017, an average of 429 products have matured every year. In performance terms, the average annualised return for the five years across all products, including deposit based which inevitably have lower defined returns, was 6.12%; 9.66% top quartile and 1.93% bottom quartile. An average of just six plans a year returned a loss. The average duration of all plans – growth, income and autocall – before maturity was 3.76 years. Autocalls have proven to be the most popular investments and overall have not disappointed investors. In a falling market, their ability to roll-on potential gains to the next observation date, mean that they have a better chance of weathering downturns and deliver increased returns for investors as the market recovers. Across the five years 1,192 autocall products matured which were capital-at-risk, i.e. excluding deposit plans. Of these 1,141

Lowes Advisers can help with any enquiries about our latest structured product recommendations, or call 0191 281 8811.

Structured Product Maturities

Capital at Risk Products

Deposits and Capital Protected

All products

2021

5 year average

2021

5 year average

All autocall products: Average annualised return All products

7.07% 9.69% 4.88%

7.37% 10.31% 4.24%

3.99% 5.67% 0.00%

2.79% 4.02% 0.68%

Upper quartile Lower quartile

FTSE 100 index only: Average annualised return All products

7.23% 9.70% 5.45%

7.40% 9.51% 5.88%

4.99% 5.67% 4.31%

4.15% 4.47% 3.50%

Upper quartile Lower quartile

11 Lowes.co.uk

INVESTMENT

Lowes Recommended Structured Product Maturities

Our experience and expertise in this exceptional area of the investment market has helped Lowes to add diversification and balance to portfolios and helped us deliver wealth building advice for our clients.

THE TABLE BELOW SHOWS THE PERFORMANCE OF the recommended products most commonly held by Lowes clients that matured in the first quarter of 2022. These were all autocalls linked to the FTSE 100 Index. The fourteen plans shown utilised seven separate counterparty banks. Ten of these plans were designed in conjunction with Lowes, five exclusively for Lowes clients and five for our clients and the wider market. This selection of products, which benefits from Lowes’ considerable expertise in the market, proves that structured products can consistently deliver their defined returns, with the added value provided by the protection to capital in all but the most extreme circumstances.

If you know someone who could benefit from Lowes expertise in this or any other field, please do not hesitate to put them in touch.

Maturity date

Term (years)

Plan Gain

Provider

Counterparty

Meteor

BNP Paribas

18/01/2022

3

31.50%

Walker Crips

Société Générale SA

24/01/2022

2

16%

Société Générale

Three UK banks

25/01/2022

3

28.50%

Walker Crips

Goldman Sachs International

03/02/2022

3.5

24.50%

Walker Crips

Morgan Stanley

03/02/2022

3.5

24.50%

Investec

Investec Bank Plc

10/02/2022

2

14.50%

Mariana

Goldman Sachs International

21/02/2022

2

21.80%

Mariana

Goldman Sachs International

22/02/2022

3

28.32%

Walker Crips

HSBC Bank Plc

28/02/2022

2

14%

Société Générale

Three UK banks

01/03/2022

3

27%

Walker Crips

Société Générale SA

07/03/2022

2

16%

Investec

Investec Bank Plc

16/03/2022

2

14%

Mariana

Natixis

22/03/2022

3

26.43%

Walker Crips

Morgan Stanley

28/03/2022

3.5

24.50%

12 Lowes.co.uk

SPOTLIGHT

Spotlight on Lowes people

Rob Earl Client Servicing Manager

Rob Earl heads up the Client Servicing team set up in 2021 to better help Lowes clients with their queries and as part of our development plans to enable us to provide Independent Financial Advice to more people who need it. Newcastle born and bred, Rob has had a long career in financial services, mainly in and around the North East, except for stints working for banks in Australia and Manchester. More recently he worked for 15 years for a large retail bank, latterly dealing with their PPI claims. Having day-to-day contact with customers of the bank was good experience for staying focussed and dealing with the issue at hand, he says. While he was at the bank, he started on his journey to becoming an authorised financial adviser, which included taking 15 exams. He is now just one step away from achieving his higher-level exams, becoming a Chartered Financial Planner, and adding to the number of highly qualified people we have at Lowes. Rob joined Lowes in June 2021 and as Lowes started on its plans to expand as a company, he moved into the Client Servicing Department and set to work developing the departments processes and systems. The Client Servicing team was set up to better serve Lowes clients wherever they are in the UK, especially those who are unable to come to the Lowes offices. Rob’s role is to help Lowes clients with any queries they may have or advice they may need, in between seeing their Lowes Consultant. He is based in Lowes’ Fernwood House office, and most of his work is done over the telephone, “but I do talk with people face-to-face when they want to pop into the building to catch up on something specific,” he adds. “No matter what the question is, clients can just pick up the phone or come into the office and we are there to help. “It’s important that clients can contact Lowes and get an answer,” he adds. “Advisers spend a lot of their time travelling and seeing clients, which means they are not always available when a client has a query. That’s when they can ring us.” The Client Servicing team consists of seven people at present. “We are a close-knit team and we’re always trying to develop our personal knowledge and understanding so that we can help clients as quickly and efficiently as possible,” Rob says. “Lowes aims to be recognised as one of the best Independent Financial Advice firms in the UK and to be able to offer advice to even more people around the country. That means the number of Lowes Advisers has to grow. Lowes has a very distinct philosophy of doing our very best for people and doing that on a personal basis. The Client Servicing team is a way to bring on new Advisers who already know and work within that philosophy.”

Asked if he enjoys the work he is doing, Rob says: “Having worked in a complaints department for several years, as much as that taught me, I am having much nicer conversations with Lowes clients. Being a qualified financial adviser and helping Lowes clients with their queries and giving them advice, you feel like you are helping people to improve their financial situation and achieve what they want in their lives. That is both satisfying and enjoyable.”

13 Lowes.co.uk

DOUG’S DIGEST

NO-ONE COULD HAVE FAILED TO SEE THE ONGOING news coverage of Russia’s invasion of Ukraine, or the horrific cost being paid by the Ukrainian people. Our thoughts go out to all those who have been affected. Against this immeasurable human cost all others pale into insignificance, but nevertheless the repercussions of this war are already having adverse effects on economies all around the globe, and will continue to do so for a long time to come. The first reaction of the main western democracies was to impose sanctions on both certain Russian individuals but also on the ability of people and companies to trade with Russia and the companies within. This included removing access for most of the major Russian banks to the SWIFT system, which allows banks and other financial institutions around the world to easily action money transfers. These sanctions and the focus of public attention quickly made many firms publicly cut ties, including large oil and gas companies such as Shell and BP, who ended joint ventures with their Russian counterparts despite this costing them billions of pounds. These announcements caused concern for investors, with equity markets falling sharply. The UK stock market, as measured by the FTSE 100 index, fell 9.29% between 10th February and the 7th March. The shares of Russian companies took the biggest hit, of course, with the stock exchange closing in an attempt to prevent a mass sell off leading to a collapse in prices. This led to Fund houses writing down any Russian investments within their holdings to zero initially and then selling those holdings as soon as the market re-opened, and funds with significant Russian exposure had to suspend trading. For UK investors, Russia has become toxic. For most western nations direct trade with Russia forms a relatively small part of their GDP, and after the initial shock had passed equity markets began to recover. The main long-term effect, however, is expected to come through rises in commodity prices. Inflation had already become an issue at the start of the year, with the UK Consumer Prices Index (CPI) rising by 5.4% in the year to January, prior to the Russian invasion. Once the war began we quickly saw oil and gas prices rise sharply with fears that Russia, one of the biggest global exporters, may cut supplies in retaliation for the imposing of sanctions. War in Ukraine

Oil and gas are not the only commodities to come out of Russia and the Ukraine however. Over 50% of the world’s supply of wheat comes from the two countries, for example, and both are

big sources of corn and sunflower oil too. Also, Russia is a large producer of fertilizer, and restriction to supplies of these ‘soft’ commodities is already leading to rising food prices. In addition, Russia is a major source for metals such as nickel and platinum, which are already in demand due to the moves towards clean energy and the electrification of heating and transport to help combat climate change. The inability of companies to source these raw materials from Russia will cause prices to rise further, leading inflation to rise higher than originally anticipated, and in all likelihood stay higher for longer. This now leads to a dilemma for central banks such as the Bank of England in the UK and the Federal Reserve in the United States. Both are tasked with keeping inflation around a 2% level, which is a target level way below the 7% CPI declared in the UK this month. The traditional way of bringing inflation down is to raise interest rates, thus increasing borrowing costs for individuals and businesses alike. The theory is having to spend more on repayments of mortgages or business loans reduces the amount available to spend, so reducing demand and consequently the prices that can be charged for goods and services. With price rises coming through in food and energy costs, however, areas where people will struggle to cut back their spending, raising interest rates could simply risk choking off growth in the economy without reducing inflation, leading to an effect known as ‘Stagflation’. The central banks are walking a fine line therefore, between controlling inflation while not damaging the domestic economy and employment levels. As most investment analysts and fund managers we speak to are the first to admit, few people know how things will develop from here both on the ground in Ukraine and in economies around the world. For now, we continue to monitor portfolios, looking for opportunities and making changes when necessary, whilst continuing to make sure we aren’t taking unnecessary risks in times of uncertainty.

120%

Rise in Commodity Prices in 2022

100%

Wheat

Nickel

80%

60%

40%

Percentage Change

20%

0%

Source: London Metal Exchange/Agriculture & Horticulture Development Board

-20%

31/12/21

14/01/22

28/01/22

11/02/22

25/02/22

11/03/22

25/03/22

08/08/22

Lowes Financial Management and Lowes Investment Management are authorised and regulated by the Financial Conduct Authority Visit: www.Lowes.co.uk | Call: 0191 281 8811 | Email: enquiry@Lowes.co.uk

14 Lowes.co.uk