Lowes Magazine 117

Issue 117

“It is not the beauty of a building you should look at; it’s the construction of the foundation that will stand the test of time.” David Allan Coe

INSIDE TRACK

COMMENT

Winner of our Competition 2020 WHEN WE SET OUR CLIENT COMPETITION IN DECEMBER 2019 LITTLE DID WE KNOW WHAT was ahead of us in terms of the Coronavirus pandemic and the substantial impact it would have on not just the markets but our lives in general. The effect on sterling (against the US dollar), which has been under pressure since the Brexit vote result in 2016, was significant in 2020. It began the year at 1.3210 and reached a low of 1.1410 in March. But it started to climb again in July and finished the year at 1.3649. We asked you to predict the mean spot price (i.e. the market price at which an asset is bought or sold for immediate payment and delivery) of the pound against the dollar on 31 December 2020, to three decimal places. Congratulations to Mr & Mrs Johnson from Stanley, County Durham, who were closest to the figure. A voucher for £250 is on its way to you.

Stay ahead of the game I THINK IT IS FAIR TO SAY THAT IN MARCH 2020, WHEN THE first lockdowns were introduced, few of us would have predicted the UK regions would be in lockdown as we entered 2021. But, while this year may have started in a way none of us would have wanted, as I write the vaccines are beginning to be rolled out and optimism exists that there is light at the end of the Covid tunnel. Throughout the past year, everyone at Lowes has worked tirelessly to keep up our high standards of service and maintain a degree of ‘normality’ for clients. Which is why I am raising the issue of end-of-tax- year planning now. Often there is a rush at this time of year to implement tax planning actions, including capital gains tax crystallisation events, transferring existing holdings into ISA wrappers, making new pension and ISA contributions, and so on. As tax wrappers and exemptions tend to work on a ‘Use it or Lose it’ basis, the importance of utilising them on an annual basis cannot be understated, particularly in long-term wealth accumulation. Paying into a pension plan, for example, benefits from tax relief at the individual’s marginal rate of tax, which over a number of years of investment can help significantly boost a pension pot, while gains on money invested into an ISA is income and capital gains tax free on withdrawal. There are other tax planning initiatives, such as gifting under inheritance tax rules, that may also need to be addressed. I raise this now because this end-of-tax-year there could be operational challenges for the industry. While technology has enabled remote working it is not as efficient as having everyone based in the office, not just for Lowes but more so for many of the providers we deal with. The level of work at this time of year can ramp up significantly, so if you potentially have tax planning needs which require conclusion before 5 April, I urge you to take action as soon as possible. In any event, is now not as good a time as ever to ask us to conduct a review of your financial planning? In doing so, your Lowes Consultant will help identify whether any changes are needed in time for the end of the tax year, or at the start of the next are appropriate. If you haven’t had a recent review, please don’t hesitate to call your Consultant to arrange one. Whether or not you have already utilised your current year ISA allowance, I would draw your attention to our latest offer included with this issue, another exclusive for Lowes and similar to the offers we secured last year, which proved extremely popular with clients. It may be of interest to you and/or a friend or relative. 50 years in the game This year is a momentous one for Lowes as we celebrate 50 years of providing Independent Financial Advice for our clients. When my father, Ken Lowes, started the company back in 1971, he was one of the pioneers of the IFA ethos, at a time when large insurance companies dominated the market. Ken wanted to give his clients the best advice using the best companies available. It is the principle we have continued to uphold throughout our five decades and is a major factor in our continued success and growth as a company. Of course, a firm like ours is nowhere without its clients, so I thank you

Regulation of funeral plans

Grid n°736872102 hard Sudoku We hope you enjoy the challenge of our first Sudoku of 2021. To complete the puzzle fill the grid so that each row, column and 3x3 block contains the numbers 1 to 9. The solution to the puzzle can be found on page 15. with family and friends around financial planning. Inter-generational planning has been one area to see increased activity as people look to ensure the money they want to go to their children, grandchildren and other beneficiaries will be passed down in the best way possible, taking into account tax issues and financial needs in later life. The danger is that people try DIY solutions. Inheritance tax and pensions saving and death benefits, which now are core to this type of planning, are complex issues and the wrong decision can leave people paying more to HMRC than they need to. Inter-generational planning ONE OF THE REPORTED POSITIVE EFFECTS OF THE pandemic has been to act as a catalyst for discussions some plans not covering the cost of the whole funeral. The FCA is warning funeral plan firms who don’t intend to seek authorisation that they should start planning how to wind down their business in an orderly way before FCA regulation comes into force. FOLLOWING EVIDENCE OF CONSUMER DETRIMENT, the funeral plan market is being taken out of voluntary regulation and placed under the authority of the Financial Conduct Authority (FCA) from the end of 2022. Reasons for this are government concerns about the variations in plan terms and conditions, which leave consumers not always fully aware what they are buying, with

Inflation index change THE GOVERNMENT HAS confirmed that the Retail Prices Index (RPI) will be reformed. By 2030 it will be brought into line with the approach used in the Consumer Prices Index including housing costs (CPIH). Statisticians argue this is a more accurate and robust way of measuring changes in the cost of living. RPI is currently used to calculate lots of different costs, including rail fares and utility bills, but compared to CPIH, in recent years it has indicated higher inflation of an average of 0.8% a year. The change could see yields fall for certain investments linked to inflation – including government bonds – providing holders with less income than before. This includes pension and annuity income, which is increased based on the current RPI formula, and could adversely affect future income streams.

Annual average CPI vs RPI over 30 years

Date CPI RPI 1990 7.0 9.5 1991 7.5 5.9 1992 4.2 3.7 1993 2.5 1.6 1994 2.0 2.4 1995 2.6 3.5 1996 2.4 2.4 1997 1.8 3.1 1998 1.6 3.4 1999 1.3 1.5 2000 0.8 3.0 2001 1.2 1.8 2002 1.3 1.7 2003 1.4 2.9 2004 1.3 3.0 2005 2.1 2.8

Date CPI RPI 2006 2.3 3.2 2007 2.3 4.3 2008 3.6 4.0 2009 2.2 -0.5 2010 3.3 4.6 2011 4.5 5.2 2012 2.8 3.2 2013 2.6 3.0 2014 1.5 2.4 2015 0.0 1.0 2016 0.7 1.8 2017 2.7 3.6 2018 2.5 3.3 2019 1.8 2.6 2020 0.9 1.5 Average 2.49 3.18

Simpler pensions statements

CONCERNED THAT PENSIONS STATEMENTS are “lengthy, inaccessible and inconsistent in design and content”, the Department for Work and Pensions is proposing that all statements are made simpler and shorter – no more than two pages – and so easier to understand. A criticism of the financial services industry is that it is so full of jargon that it baffles the people it serves. It is important that financial statements first are read, and also can be understood, so they are meaningful and can be used to evaluate an individual’s pension situation. One of the benefits of Independent Financial Advice, of course, is having someone to explain and review your pension position and how it sits within your overall financial plan in terms of your overall wealth and future financial position.

Source: Office for National Statistics (ONS)

While this event is some years away, if it is of concern please talk to your Lowes Consultant or call 0191 281 8811.

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Make your money work. Best bank & building society rates Type Amount Provider Account

Follow us for company updates

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Gross Rate

Contact

Unrestricted instant access accounts

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@LowesFinancial

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Online, branch

£1 +

Atom Bank

Instant Saver

0.50% www.atombank.co.uk

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Fixed rate bonds

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Lowes Financial Management

Online

£1,000 - £85,000

QIB UK (Raisin)

1 Year Fixed Term Deposit

0.80%

www.raisin.co.uk

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for choosing Lowes to look after your wealth and for everyone who has recommended us to children, grandchildren, family and friends. Finally, I hope you and yours continue to escape the worst of the pandemic and stay safe. Wishing you a prosperous 2021. Ian H Lowes, Managing Director

Online

£1,000 - £1,000,000

Gatehouse

2 Year Fixed Term Deposit

1.10% *

www.gatehousebank.com

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Online

£1,000 - £1,000,000

Gatehouse

3 Year Fixed Term Deposit

1.25% *

www.gatehousebank.com

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* This is the Expected Profit Rate (EPR).

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Measures of inflation - The average change in prices of goods and services over a 12 month period to December 2020 Retail Prices Index (RPI) 1.2% Consumer Prices Index (CPI) 0.6%

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Covershot: Pigeons occupy Grainger Street, Newcastle on the first day of the second national lockdown. Alamy Stock Photo/Owen Humphreys

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Sources: Providers’ websites, Office for National Statistics, www.thisismoney.co.uk, www.moneysupermarket.com, www.moneyfacts.co.uk 18.01.2021. All accounts subject to terms and conditions.

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Source: www.printmysudoku.com

A number may not appear twice in the same row or in the same column or in any of the nine 3x3 subregions.

2 LOWES Issue 117 · Published January 2021 The content of the articles featured in this publication 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.

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.

We have all the free sudokus you need! 400 new sudokus every week. Make your own free printable sudoku at www.PrintMySudoku.com

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PENSIONS

SAVING

Cash trap

NS&I rate cut The recent anticipated reduction in interest rates by National Savings and Investments (NS&I) saw the Treasury-backed savings and investments body lose £500 million in the month before the announcement alone, on top of which, post event, a reported 43% of NS&I account holders said they would transfer their cash out as a result of the cuts going through. NS&I savers who want to retain their money in cash, now have to weigh up the guarantee provided by the Treasury (aside from the unlikely event that the UK government were to fail) offering very low levels of interest, with better rates being offered elsewhere. An alternative is to transfer into Premium Bonds and hope to win some prize draws! Financial resilience A financial planning benefit of the pandemic has been to highlight to more people the importance of financial resilience, including having an emergency fund to fall back on. According to a recent survey by Aegon, 37% of people in the UK are now more likely to build up a rainy-day fund than prior to the arrival of the Coronavirus. With interest rates for easy access accounts at a little above zero, putting some cash away in fixed term accounts, for a very slightly better rate, may be tempting. But that can restrict access to the money when the rainy day comes and as such, fixed term accounts are not appropriate for emergency funds. First step in inheritance planning An essential part of estate or inheritance planning is writing a Will. Yet survey after survey shows that a large percentage of adults in the UK have not put a Will in place. It doesn’t need to be difficult or complicated to put your affairs in order by writing a Will and it can prevent significant problems when dealing with your estate. Not doing so can see property, financial and other assets given to someone you may not have chosen when you die.

State Pension Age now 66

THE CORONAVIRUS PANDEMIC HAS SEEN BILLIONS OF pounds paid into cash accounts since the initial lockdown in March 2020. This is in part due to those fortunate enough to have retained an income finding their expenditure has reduced – such as from not having to travel to work, less spending on clothes, holidays and nights out etc – so having spare cash they are able to save. This is both good and bad news, as whilst cash is considered a ‘safe’ investment, with interest rates at record lows and generally below the current level of inflation, it is in fact sitting there losing its spending power. This situation is likely to get worse as the impact of the Coronavirus pandemic on the UK economy means that interest rates are highly unlikely to be raised any time soon, while inflation may well rise as the economy recovers. This means holding onto cash for too long, or in place of assets which are growing over time, can see savers continue to lose money when they could be making it by investing in stockmarket funds. Worryingly, reports and surveys also suggest the influx of money into cash accounts includes a large amount moved out of investments into cash following the February/March stockmarket falls, with individuals surveyed saying they would wait until markets have recovered by a set percentage before they reinvested. These investors will have locked in their losses by being out of the market when the recovery in asset prices occurred, instead looking to buy back in when prices could be much higher – a classic DIY investor error. Whilst generally we recommend holding several months’ worth of expenses in cash in an emergency fund, we believe utilising stockmarket based investments – primarily collective funds and structured products – is essential to grow wealth, especially in the current environment.

FROM 1 OCTOBER 2020 THE STATE PENSION AGE – the earliest age at which an entitled UK individual can claim the pension – became 66 years. To receive the full State Pension an individual must have paid National Insurance for at least 35 qualifying years and be 66. We know that further age increases are planned for the years ahead, as government seeks to balance the cost of maintaining the State Pension with increased longevity in the UK. The State Pension Age will gradually increase to 67 between 2026 and 2028, depending on a person’s date of birth but it will be reviewed at least once every five years. The increases in age are to better reflect the demographic changes in the UK population, as people are living far longer now than when the State Pension Age was set at 65 in 1945. At that time the average life span for a male was 70 years. The government also has changed the way in which the increase in State Pension Age is phased, so that rather than reaching State Pension Age on their birthday, people will reach it at 66 years and a specified number of months. It is important to note that the State Pension is not paid automatically, it has to be claimed. The Government will send a letter with specified options a few months before the age at which you can claim. Also, claiming the State Pension can be deferred. Putting back receipt of the pension means an individual can receive higher payments when they do claim in the future. There is a State Pension Age calculator on the www.gov.uk website.

Pension access age rises to 57 Lowes Consultant Stephen Hoggarth

says: Alongside the rise in the age at which individuals may claim the State Pension, the Government has confirmed that the pension freedom age, that is the age at which someone can access their personal pension, will be increased from the current age of 55 to 57 from 2028. There are several reasons for this, including: 1 It ties-in with the two year rise in the age at which an individual can claim the State Pension. 2 It also reflects increases in longevity in the UK. 3 Pensions are intended for funding retirement and the government wants to ensure pensions savings provide for later life income. With this change now confirmed, it is important that anyone who will be 55 at the cut-off point in 2028 (the exact date has yet to be confirmed) who was intending to draw on their pension from that age, now starts to make alternative plans to fund the intervening two years. Increased ISA saving is one option, not least because these vehicles are also free of income and capital gains tax. If this is of concern to you, please talk to your Lowes Consultant or call us on 0191 281 8811. We are here to help.

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TAX

50 YEAR ANNIVERSARY SUPPLEMENT

The taxing question

Our 50th Anniversary

Lowes Consultant Adam McLachlan says: Whether or not there are tax increases in 2021 it is important we take advantage of the reliefs and

THIS YEAR, LOWES FINANCIAL MANAGEMENT celebrates its 50th year providing clients with personal and professional Independent Financial Advice. Ian Lowes, Managing Director, Lowes Financial Management, writes: This is a momentous year for Lowes and I am immensely proud to be presiding over the company that my father established fifty years ago. Whilst I was too young to remember the first office in Pilgrim Street, Newcastle, I distinctly remember the early years at Market Street, which was the head office for a decade. The 1984 move to Holmwood House, which was the company’s home for over 30 years was a big part of my life, as of course was the move to our new home, Fernwood House, in 2016. We are now a group of companies under the Lowes umbrella, represented by over 90 individuals, all serving our clients in line with our strapline: ‘Where personal finances are cared for personally’. I am extremely proud that Lowes is amongst the most highly regarded Independent Financial Advice firms in the profession. Not many firms get to celebrate their 50th anniversary, neither do all firms succeed when the reins are passed from father to son. When Ken stepped down and I took over as Managing Director in 2002 there was naturally considerable pressure on the ‘boss’s son’ to do well; or to put it another way, failure was not an option! The business has been a big part of my life, for all my life and I was determined from an early age to join the firm. Ken, however, wasn’t going to make it easy and encouraged me to instead, follow an alternative path. But after a few years on the outside, I was grateful for the opportunity to join the business. Seven years later however, I left to pursue my own business interests and subsequently, a degree in Business Management and Administration. Returning to the firm in 2000 I certainly had no expectation of running it for many years. I concentrated on broadening my knowledge and obtaining advanced, professional qualifications to the extent that I obviously impressed Ken enough for him to entrust the business into which he had poured so much over 31 years, into my hands. I was ambitious for the firm and my plan was to grow the number of Consultants and quite dramatically. We interviewed 160 potential candidates in the first year, of which we felt just three matched our rigorous criteria. We appointed just one, Rob Newton, who continues to be a great Lowes Consultant to this day. That was an important process because it showed me, in no uncertain terms, what previous incumbents of my position had

also established; that finding the right calibre of individual to deliver the quality of service we expect for our clients was far from easy. As a result, rather than any rapid expansion, we have selectively grown the business and number of Consultants, incrementally, year by year and seen some retire along the way. In 2005 we re-introduced one of Ken’s most successful initiatives, the seminars. I have now presented to thousands of people across the UK and have been delighted with the satisfaction, with all but a handful stating their attendance was time well spent. More than a few have gone so far as to state attending the seminar was one of the best things they ever did. I vividly remember my nervousness before delivering the first seminar but now with hundreds under my belt I look forward to them and it has been frustrating not to be able to run any sessions during the pandemic. An area of personal interest and one for which Lowes is now a recognised authority in the profession, is structured products. Over the years we have developed a well-honed expertise in these investments. In the early days I would analyse and post details of every product on our website. Now with typically 40 products being launched each month we have a dedicated team which conducts the analysis and manages the Lowes ‘Preferred’ list and our structured product websites. We have been through two major market incidents in my tenure at the helm of Lowes, the Financial Crisis of 2008/9 and the Coronavirus pandemic. In 2008 we all came together to tackle the issues. This time around it has been a little more challenging, as we are all isolated from one another. But our determination to do our best for clients is the same, nevertheless. Having looked forward to our 50 th anniversary, sadly it seems highly unlikely we will be able to celebrate in the way we would have wanted this year, not least our planned garden party at which we hoped we would see some of our longest standing clients. It has been extremely frustrating for us, as a people business, not to see our clients face-to-face and we thank all our clients for their understanding and patience in what have been difficult times. So where to in the future? We are looking to grow the business, as we have done over the past 19 years, but we’ll not be making dramatic changes. You can be sure that we will maintain our family culture and the quality of advice and service for which Lowes is renowned.

exemptions which are available today, before the end of the current tax year. Pensions deliver an uplift from tax relief on contributions, making them a particularly tax efficient savings and investment vehicle. The maximum that can be paid into a pension at present, the annual allowance, is £40,000 (plus potential unused allowances from the last three years depending on your pensionable earnings). The cumulative effect of that tax relief can help boost the size of a pension over the years, helping to build wealth for our retirement. So it can be advantageous to pay more into your pension if you can afford to do so, particularly for higher rate tax-payers who benefit from 40% tax relief. Income tax is payable on money taken from a pension as income and there is a limit on how much can be held in a pension over a lifetime, currently £1,073,100. The Capital Gains Tax exemption allows individuals to benefit from up to £12,300 of gains made on investments and savings. This can be a useful tool in retirement, as it allows returns on capital to be drawn down to boost retirement spending, to keep within a lower income bracket, for example. We can pay £20,000 per annum into an Individual Savings Account (ISA) and not have to pay income or capital gains tax on the returns from it when money is taken out. What must be noted here is that ISAs fall within your estate for Inheritance Tax (IHT) purposes – so are not exempt from that tax. On that note, there are numerous ways we can make sure HMRC only receives what it is due through IHT planning. These include amounts we can gift tax free annually, and where larger sums are involved use of more complex tax-efficient vehicles such as Business Property Relief – and of course trusts. Used effectively within a well-constructed financial plan, annual tax allowances and exemptions can make a significant difference to your finances. If you have any questions about how best to use your annual allowances and exemptions talk to your Lowes Consultant or call 0191 281 8811 and we will arrange for someone to talk to you.

LOCKDOWN AND ITS POTENTIAL IMPACT ON THE economy has seen the Government increase the UK’s debt. The Office for Budget Responsibility (OBR) estimates total government borrowing will be around £394bn in the financial year to 5 April 2021, compared to the expected £55bn prior to the pandemic. The inevitable question being banded around the media at the moment is whether the Chancellor of the Exchequer will increase taxes or reduce tax reliefs and allowances in order to raise revenue for the Treasury to start paying down the debt which has been incurred through the Coronavirus crisis. There has been plenty of speculation and warnings of ‘significant’ tax hikes across the board. We think this blanket approach is highly unlikely but the Chancellor could make strategic changes while balancing the need to keep the economy afloat and to keep people spending. One area that is being highlighted for potential change is Capital Gains Tax (CGT). The Office for Tax Simplification has recommended that CGT rates be brought in line with income tax and the annual exemption amount reduced from the current £12,300 to around £5,000. The Chancellor cancelled the November Budget in view of the uncertainties around the economy as the pandemic continued. His March Budget Statement, coming closer to an end to the crisis, we hope, now vaccines are in play, will be where we are more likely to see how the debt will be paid back and who will be paying. Some analysts believe governments in general will not hike personal taxes as this will put an additional burden on consumers and businesses, which could stall attempts to re-galvanise economies. Key here, is that tax planning has to be conducted on what we know, rather than on media hype. Rest assured, we will be keeping our finger on the pulse and issuing carefully considered advice on any implications on wealth building and inheritance based on the facts, rather than speculation.

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50 YEAR ANNIVERSARY SUPPLEMENT

A brief history of Lowes Financial Management over the past 50 years

1979 Margaret Thatcher becomes the UK’s first female Prime Minister

1973 Stock market crash

1981 First floppy disc for data transfer launched

1971

1972

1973

1978

1980

1984

1984 FTSE 100 launched

Lowes founded by Ken Lowes, trading as Kenneth J Lowes Estate Planning and Investment Services Ken Lowes: “I set about offering the best advice, with the best available companies, covering all aspects of financial need. I became what was then one of a tiny number of truly independent financial advisers.”

Lowes moves to Market Street Ian Lowes: “While I don’t remember the Pilgrim Street office from my childhood, I can clearly remember Lowes in Market Street, and the office expanding from number 10 to include the neighbouring property.”

Tom Harris becomes Lowes first Consultant

Lowes moves to Holmwood House In this year, Lowes moved out

First client dinner held, at Civic Centre, Newcastle

Published and distributed the first Lowes Newsletter on pink paper

Tom Harris, one of the company’s first clients, became its first Consultant. Tom also formally opened Fernwood House for Lowes in 2016.

of Newcastle city centre to the leafy suburb of Jesmond. Holmwood House opened up opportunities for Lowes to expand and also to run seminars for potential clients. It remained the Lowes headquarters until 2016.

1989 Bank of England base rate rises to 14.875%

Pilgrim Street Newcastle

1993

1992

1987

1990

1985

2004

1990 First Iraq War

Brand evolution The evolution to a Crane logo further represents the values that we hold so dearly.

Lowes grows to over thirty people Everyone got involved in arranging the first garden party which helped raise £16,000 to provide a Minibus for St Oswalds Hospice.

Lowes Defensive Strategy Fund

New name, new logo The company name is changed to Lowes Financial Management and the new logo is the Feng, a mythological creature that brings health and prosperity.

Lowes magazine launched More of a newsletter in style than magazine in the early days, the aim was the same, to provide our clients with added value by providing regular information and updates on financial and investment matters.

Stockmarket crash The Yuppies and the rest of the UK were given a short sharp investment shock as years of slowly rising share prices were lost in a single day, known as Black Monday. The UK stock market dropped 11% and the S&P 500 by 20.5% on 19 October.

A London office is established in Westminster

Jerry Hall and Caroline Robinson join the company

Launched in Jersey, along with several specific funds for inheritance tax.

Lowes awarded Fund Manager of the year by Royal Life International.

Lowes awarded Financial Adviser Unit Trust Association Marketing Award

2007

2004 ‘The Facebook’ launched

1998

2000

2002

2004

2006

2007 iPhone launched

Ian Lowes among Britain’s 50 Most Influential IFAs

Lowes becomes a Chartered Independent Financial Advice firm Lowes was among the first IFA firms to achieve this status. It is a reflection of Lowes’ commitment through the years to provide the best advice we can for our clients.

Dotcom bubble bursts The FTSE 100 was hugely

Ken Lowes retires as Managing Director and his son,

1998 Google founded

2003 Second Iraq War

Lowes implements The Personal Choice Portfolio

overvalued by the end of 1999 as investors poured money into ‘hot’ technology stocks and a shock was inevitable. The markets continued their downward trajectory until March 2003, when the second Iraq War began.

2003 Stockmarket recovery begins

Ian Lowes is recognised as being among Britain’s 50 Most Influential IFAs by industry magazine Professional Adviser.

Neil McLachlan becomes a director of Lowes

Ian Lowes is appointed as Managing Director and Chair of the Board

2012

2011

2010

2009

2008/9

2009 Bank of England base rate cut to 0.5%

2010 iPad launched

Lowes client referral charity initiative To mark our 50 years, Lowes has pledged to donate up to £50,000 to charity. One initiative will consist of £50 being donated to a chosen charity whenever a new client comes on board generated by a referral from an existing client. £50 will be donated to a charity on behalf of the new client, another on behalf of the person who referred the client, as well as a £50 donation on behalf of Lowes – a total of £150 per referral. We have five charities to choose from: Dementia UK MacMillan Cancer Support Chronicle Sunshine Fund Plastic Oceans Blue Cross

Doug Millward appointed as Investment Manager Lowes’ Investment Manager Melvyn Bell (right) retires and passes the mantle to his ‘understudy’ with 16 years’ experience with Lowes, Doug Millward.

Financial Crisis The third largest stockmarket event in 100 years arose from the growth and subsequent collapse of the US subprime mortgage market resulting in the failure of Bear Stearns and later investment firm Lehman Brothers. This saw markets plunge in 2008. The recovery strategies including Quantitative Easing (QE) are still with us today. Lowes moves to Fernwood House After 32 years, Lowes had outgrown Holmwood House and was in need of larger premises. Coincidentally, Fernwood House, then the national headquarters of Greggs the bakery chain, came onto the market. It was perfect for our needs, and just two doors down from Holmwood House! We bought the premises and officially opened it as the new Lowes headquarters on 23rd May 2016. 2016

Winner of Best Tax and Estate Planner – Moneyfacts Awards

Winner of Best Retirement Adviser – Moneyfacts Awards

Lowes Charity account established

Winner of Best Investment Adviser – Moneyfacts Awards

2016 Donald

2013

2015

2015 Pensions Freedoms introduced

Trump voted US President Elect

First Mariana 10:10 Structured Product launched The 10:10 Plans extended the maximum potential investment term of a structured product to 10 years giving an extra 4-5 years for markets to recover in the event of a fall. The plans proved very popular, influencing the sector with most providers following suit, launching 8-10 year plans as a result.

Lowes launches SP-Perspective

2016 UK votes to leave the EU - Brexit

2021

2020

2018

2016

2017 New £5 and £10 notes introduced

Coronavirus pandemic The Coronavirus pandemic is, of course, still with us. It caused a stockmarket crash, which saw the FTSE 100 fall from over 7500 to 4993, before starting to recover again. The full impact on the UK economy has yet to be seen.

Lowes launches UK Defined Strategy Fund

Lowes grows to over ninety people In 2020 the team has grown to over 90 personnel all working together to provide our personal approach to financial planning. During this year we also said happy retirement to five long-serving colleagues.

100 th issue of the

50 years! Lowes marks 50 years serving clients in accordance with our strapline: ‘Where personal finances are cared for personally’ .

Lowes magazine This was a major

Winner of Best Investment Adviser - Money Marketing Awards

Winner of Best Investment Adviser - Money Marketing Awards

An OEIC which invests in auto-call style

milestone for our quarterly magazine and celebrated accordingly.

structured products with the advantages of a mutual fund.

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Pilgrim Street image courtesy of the Newcastle Chronicle

50 YEAR ANNIVERSARY SUPPLEMENT

ADVICE

LOWES FOUNDER KEN LOWES WRITES: FIFTY YEARS ago, with two very small children, a mortgage and a very successful career as a Life Underwriter with Manufacturers Life, I decided something was missing. I was giving advice to mainly young professionals, but it was limited to life assurance policies of one company. So, I resigned my position and set about doing the same but offering the best advice, with the best available companies, covering all aspects of financial need. The price of independence was high and the playing field far from level. But I knew that if the advice was good and the presentation professional, success was assured. I became what was then one of a tiny number of truly independent advisers. Fortunately, not many people at that time had money in the bank. They had not inherited the family home, a pension pot, or a large redundancy cheque; that was to come many years later. I say fortunately because within two years we were embroiled in a stock market that fell by seventy five percent and took eight years to recover. I helped young people protect their families and business owners protect their businesses. With income tax at 98%, no that is not a typo, the basic rate was 35% rising to 83%, investment income 15% on top, I did a lot of tax planning. As with today the real benefit of independent advice is knowing what to avoid and we did just that, avoiding Barlow Clowes and various other dubious companies and schemes. I guess that’s one reason we have been recommended from one generation to another and even, another. The big change came in 1982, many employees were receiving redundancy cheques after a lifetime in industries that were closing. I recognised the increasing need for all embracing financial advice but the quality on offer was lacking and far from “all embracing”. It was time to expand. We moved from an office in Newcastle city centre to Holmwood House in leafy Jesmond with comfortable interview rooms and lots of parking. Perhaps the best idea and the one that set us apart from others was our financial seminar, we were the first in the country to offer such a service, it was 1984. During the refurbishment of Holmwood House we constructed a sixty-seat conference facility and installed air conditioning. Not an entire success as those that picked the wrong seat froze and there was also the embarrassing “farting” noise it made, often during the most intense part of the presentation. It was probably the most enjoyable time in my career, I was surrounded by staff who were great and clients that recognised we were different. We designed our own exclusive computerised office to make it run better and give a better service. That seems normal today but then it was revolutionary. Not so great when it took a full weekend to print two thousand client investment reports only to find on Monday morning that the printer had jammed and all reports were printed on one line, the same line. Start again! We survived the power cuts, the government imposed three- day working week, the stock market crash and candlelight interviews of the seventies. The huge change was brought about by the 1986 Financial Services Act which meant every firm had 50 years of Independent Financial Advice

How we have helped clients

LOWES CONSULTANT CHRIS MILSOM outlines one of the situations where a client requires advice and Lowes is able to help. One of the key areas we help clients with is inheritance tax (IHT) planning. It is important to people that their hard-earned money on which they have already paid

the person’s estate for IHT purposes. There is a sliding scale applied depending on how long the person lives for after making the gift within that seven year period. The key point to remember here is that once gifted, the money is gone. A proper assessment of an individual’s wealth and needs – including financial provision for the future, such as for Long Term Care – should be undertaken. This should include calculation of how long a wealth pot may last, particularly in retirement when there may be no way to top up the pot with income and costs may rise through inflation. In this situation a special Trust that can make payments back to the Settlor may be appropriate. This allows for a sum to be put into a Trust for a named individual or individuals, but the person making the payment, the Settlor, can receive payments from the Trust should they need it. Other assets, such as property, can be given away also but they are subject to the seven year rule and importantly, they must pass outside of a person’s control and use to fall outside the estate. Pensions Another way to pass on wealth since the Pensions Freedoms came in is by using a flexible pension. The death benefits now applicable mean that pension pots can be passed on free of tax to beneficiaries on death of the pension holder if that occurs before age 75. After that age, the beneficiary pays income tax at their marginal rate of tax when money is withdrawn. Giving money to charity If you leave 10% of your taxable estate to charity, the IHT rate of the balance falls to 36% instead of 40%. This could result in £10 ending up in the hands of the charity for every £1 less that the beneficiaries receive. As can be seen, IHT planning is not simple and it should be undertaken sooner rather than later. Too often people come to us late in the day for IHT planning help. Whilst we make a significant difference in many last-minute cases, IHT mitigation is best done in advance and should form part of an overall tax planning strategy.

Father and son: Lowes founder Ken and Ian Lowes, now Managing Director of Lowes, at the time of Ken’s retirement.

to carry out business in the way we had been doing for years. The question of course is, has the billions of pounds spent on regulation to protect clients been good value? I do not think so! The public still suffer from bad advice and confusing product promotion. Answer me this, how can it be reasonable that you get 0.1% on your savings but pay 36% on your credit card debt? It was 36% when building societies were paying 12% on your savings, but then I am getting older and my campaigning years are over. And now! Well, the youngest of those small children I mentioned earlier is in his fifties and successfully running Lowes with a satisfaction rating that is even greater than the one I left him with in 2003.

tax, benefits those to whom they want to leave their wealth and no more than necessary ends up as revenue for the Treasury. The current rate of IHT is 40% of the chargeable amount of an estate. There has been a greater need for IHT planning over recent years due to the freezing of the nil rate band for the past decade at £325,000. This was due to rise in line with inflation from April 2021 but that may not happen. Since 2017 the Residence Nil Rate Band has applied also. In the current tax year, this enables another £175,000 to be passed on from residential property inherited by ‘direct descendants’ of the individual. There are too many criteria that apply to go into here but it should be noted that this exemption may not be available, or in full, to everyone. Gifting Passing on of wealth can be undertaken in a number of ways but gifting is an often used strategy, typically around key life stages, births, marriages and house buying for example. While it may seem simple, we recommend anyone considering gifting to loved ones, particularly a sizeable sum of money, first takes Independent Financial Advice. Gifts can be made as one-off payments, up to £3,000 a year in total free of IHT; on marriage – parents and grandparents can gift £5,000 and £2,500 respectively, plus £1,000 to others and as gifts from normal expenditure out of income (i.e. ‘surplus’ taxable income) as well as up to £250 per person. Money can be gifted at any time for any amount over and above these exemptions but these gifts, known as potentially exempt transfers (PET), only become inheritance tax exempt if the person gifting the money is alive seven years on. If not, then the value of the gift falls within

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If so, our contact details are: Email: Contact@Lowes.co.uk Telephone: 0191 281 8811 Visit: www.Lowes.co.uk

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ANNUITIES

INVESTING

Is there a case for annuities in 2021?

Trending today

ANNUITY SALES FELL OFF A CLIFF WITH THE announcement of the pensions freedoms in 2014 and have never recovered. The reason is the flexibility around accessing pensions now post age 55, such as through income drawdown, and also the death benefits, which enable the passing on of a pension to a named beneficiary or beneficiaries – without a tax charge if the pension holder dies under the age of 75. Also, pensions sit outside an individual’s estate for inheritance tax purposes. The main benefit of annuities is that they provide a regular income for life. However, that amount is set at the time the annuity is purchased and annuity rates have been very low for the past 20 years. In addition, unless a joint annuity is held, often annuity payments cease with the death of the annuity holder and are not passed on to any beneficiaries. There are many different types of annuity, from single life or joint life, through inflation-linked and guaranteed annuities, to those for people who smoke or are in ill health.

ESG HAS BECOME A GROWING TOPIC OF DISCUSSION and a focal point for the investment industry over the past year. Standing for Environmental, Social and Governance, it is an investment strategy that looks at the sustainability and social impact of investing in companies – it is also known as socially responsible investing (SRI). The strategy avoids companies engaged in areas such as tobacco, fossil fuels and so on and also looks at how a company is being run, which will include things like its impact on climate change through energy efficiencies and the materials used in its production processes, its overall effect on the environment, how it treats its employees and how it makes its profits. In many ways it is a more progressive investment strategy to the ethical/green ones of the past which tended to simply exclude what were termed ‘sin’ stocks, such as alcohol, pornography and arms. While typically these will be excluded from an ESG or sustainable fund, now fund managers are looking for companies also that are trying to positively affect the world. Sustainable fund managers often are keen to help companies improve their ESG standing rather than avoid investing in them altogether. Not only is ESG investment growing as a movement amongst consumer-focussed funds but pension companies are under pressure from their members and also the government to invest responsibly, as the UK heads towards its commitment to zero net emissions of greenhouse gases by 2050. This is both raising the profile of ESG and showing the path for companies to follow. Performance One of the criticisms of ethical/green funds in the past is that by excluding high performing areas, such as tobacco and oil, they were destined to underperform the market. So often there was a performance impact for making an ethical choice. However, as investment funds have started to become more active in the areas of ESG and sustainability, this has changed. Fund managers such as Fidelity have commented: “In 2020, we saw how companies that took environmental, social and governance issues seriously going into the [Coronavirus] crisis,

Rates typically are presented as a percentage of £100,000 per year with basic and enhanced annuities usually paying the highest rates. Since pensions freedoms, data shows that the vast majority of people have been opting for income drawdown. This keeps the money in control of the individual, who is able to invest it in the way that they want and pass it on to their beneficiaries. Occasionally we see media stories around increased sales of annuities – particularly when stockmarkets have fallen and a regular income albeit a low one may look more attractive – but they have been very small percentage sales increases. While annuities may be right for people in particular circumstances, due to their restrictions and current low rates, in general, the current market is tending towards the flexibility and options that come with drawdown solutions. We assess clients’ individual needs and will advise accordingly, to ensure our clients get the best outcome for their own set of circumstances.

outperformed those that didn’t, both during periods of market volatility and relative calm.” Likewise, recent data shows that in the tough UK market last year, ESG focussed funds tended to outperform their non-ESG peers. Over time, however, they are expected to perform on par. Virtuous circle There are sound reasons for companies to commit to ESG principles, because the more they do the right thing, the more they attract stable capital flows, which leads to better outcomes for the company, its investors, and for society. Likewise, the more investment managers start questioning companies in which they are looking to invest about their ESG credentials, the more companies will be encouraged to commit to sustainability. Another driving force towards ESG recognised by the industry is that younger investors are taking greater interest in where their money is invested, notably that it is supporting positive change globally and not doing environmental or social harm. This ESG groundswell from the industry’s future investors also has helped focus asset managers’ minds on ensuring their funds are committed to ESG principles. Something to be aware of is that not all ESG/sustainable funds are created equal. Some funds are being badged ESG but do not fully meet ESG credentials. Careful research and selection is essential. According to latest figures from the UK’s Investment Association, over £7 billion went into responsibly invested funds in the first three quarters of 2020, up from around £2 billion in 2019. Those figures clearly show the growing interest of this investment strategy to investors and that it is not just a fly-by-night ‘trend’. As such, we can expect to see greater availability of funds in the market.

Annuity rates for 65-year-old per £100,000

Annuity Type

Single Life £4,584.12 £4,526.64 £2,544.12 £2,518.92

Joint Life £4,187.08 £4,176.05 £2,266.32 £2,255.76

Single Life (Smoker)

Joint Life (Smoker)

No Guarantee, Level

£5,177.76 £5,041.68 £2,950.32 £2,895.00

£4,643.88 £4,597.08 £2,481.00 £2,450.88

10 Year Guarantee Level

No Guarantee, RPI

10 year guarantee, RPI

Fixed Term annuity 20 years

£5,351 – this is would pay the same value as the return is calculated based on capital value and term, this would provide no maturity value, funds would pay to clients estate on death before end of the term.

Notes: Smoker at age 65, smoking 20 a day since age 18, but with no additional medical information. A person’s height, weight and postcode can all impact the annuity rate as these can impact life expectancy.

Pensions freedoms Anouncing the Pensions Freedoms in the 2014, then Chancellor of the Exchequer George Osborne declared they were the “biggest changes to pensions in 100 years”, where “no-one will have to buy an annuity”.

If you are interested in learning more about responsible investments please talk to your Lowes Consultant or call 0191 281 8811.

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