Lowes Magazine 117

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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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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

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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

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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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.

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