Lowes Magazine 117

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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