Lowes Magazine Issue 116

Issue 116

“In calm waters every ship has a good captain.” Grover Cleveland

INSIDE TRACK

Keith Hanna SADLY, WE HAVE TO ADVISE OF THE PASSING OF KEITH HANNA, OUR RETIREMENT PLANNING Manager, who died suddenly in September. Keith joined Lowes in 2016 and was an invaluable member of the Lowes family. As manager of our Pensions Team, Keith used his decades of experience and expertise in the area of pensions and tax to great effect in helping many clients structure their retirement plans and draw their retirement income in the most tax efficient way. He was highly regarded by his colleagues, both for his expertise and his quick wit and humour,

having the remarkable talent of blending the professional with being fun to work with. He will be sorely missed by all of us here at Lowes. Our thoughts are with his family.

Video consultancy AS A RESULT OF THE PANDEMIC WE HAVE HAD TO FIND new ways of working, one of which has been to employ video software to conduct our client meetings. Despite being new to both our clients and Consultants, these online meetings have been very successful, enabling Lowes to continue to deliver advice in a personal way, albeit not face-to- face in the same room! If you’ve not had a chance to have a video meeting as yet and would like to know how to do so or to try it out, please call us on 0191 281 8811 or email at client@Lowes.co.uk . If you are unfamiliar with this kind of technology, our technical team can help. Grandparent carers’ NI credits GRANDPARENTS CARING FOR UNDER 12S CAN CLAIM for National Insurance (NI) credits even if care is being provided virtually due to the coronavirus, for example via phone, FaceTime, Zoom or other video facilities. National Insurance credits can be claimed for the financial years 2019 to 2020 and 2020 to 2021. NI credits can be useful in helping to close any gaps in National Insurance (NI), as well as building up the necessary 35 qualifying NI years to get entitlement to the full State Pension. Grandparents need to be below State Pension Age to claim the credits. A useful factsheet can be found on the www.gov.uk website .

HMRC sees IHT revenues fall

INHERITANCE TAX (IHT) RECEIPTS FELL FOR THE FIRST time in a decade, in the 2019/20 tax year, down 4% year-on- year to £223 million. Fewer than four in 100 UK deaths in the period resulted in an IHT charge. A major reason for this is the introduction of the Residence Nil-Rate Band tax-free threshold in the 2017-18 tax year. This legislation meant that, subject to certain criteria, in addition to the main £325,000 per person IHT Nil Rate allowance, individuals could pass on another £100,000 from wealth in their primary home to a ‘direct descendent’ tax free. The figure has increased by £25,000 each year, reaching £175,000 at the start of the current tax year. The Residence Nil-Rate Band is now an important part of tax planning for individuals and couples. Your Lowes Consultant can explain it in more detail or call 0191 281 8811 and we will arrange for someone to speak with you.

Residence Nil Rate Band 2017/2018

£100,000

2018/2019

£125,000

2019/2020

£150,000

2020/2021 £175,000 2021 onwards: increase in line with the Consumer Price Index

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

Follow us for company updates

Gross Rate

Contact

Unrestricted instant access accounts

Principality Building Society

0.8% www.principality.co.uk

Online

£1 +

Web Saver 1

@LowesFinancial

Fixed rate bonds Online, telephone or postal

Lowes Financial Management

www.alrayanbank.co.uk

£1,000 - £85,000 Al Rayan Bank 1 Year Fixed Term Deposit

1.27% 2

www.alrayanbank.co.uk

Online, telephone or postal

£1,000 - £85,000 Al Rayan Bank 2 Year Fixed Term Deposit

1.36% 2

Online

£1,000 - £85,000 Bank of London & the Middle East 3 Year Fixed Term Deposit1 1.45% 2

www.blme.com

Notes 1 Must be opened and managed online. 2 This is the ‘expected profit rate’ under Sharia compliant accounts.

Measures of inflation - The average change in prices of goods and services over a 12 month period to August Retail Prices Index (RPI) 0.5% Consumer Prices Index (CPI) 0.2%

Covershot: Braies lake in background of Seekofel mountain in Dolomites. Photo: Shutterstock.

Sources: Providers’ websites, Office for National Statistics, www.thisismoney.co.uk, www.moneysupermarket.com, www.moneyfacts.co.uk 15.10.2020. All accounts subject to terms and conditions.

2 LOWES Issue 116 · Published October 2020 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.

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COMMENT

Child Trust Funds come of age FROM SEPTEMBER THIS YEAR THE FIRST children for whom Child Trust Funds were bought will be turning 18, and so able to access the money which has been saved for them. Imagine coming into thousands of pounds on your 18th birthday. What would you do with it – invest it in an ISA, save it into a pension, or maybe, spend it? Interestingly, a recent survey found that a large proportion of children didn’t know they had a CTF, meaning it had been kept from them by those investing for their future. There could be good reason for that. We typically advise that where a child is likely to have large amount of money invested on their behalf, rather than pay it into a CTF (as were) or its current equivalent, a Junior ISA (JISA), which are accessible at age 18, the money is best held in a properly managed, well diversified portfolio, but in trust, which can provide for more control over the money and when it is accessed.

From idea to innovation MY PASSION FOR ALL ASPECTS OF MY PROFESSION and financial planning generally, occasionally resembles an obsession around certain elements, not least structured products. Indeed, I am currently half-way through a master’s degree dissertation on the subject. Over the last two decades, Lowes has evolved from being one of the most vociferous critics of certain variations of these structures, to ultimately playing a fundamental role in helping to shape the sector to help achieve better outcomes for our clients and the wider market. We are now recognised as one of the leading experts in the field. When on holiday last year, one evening, instead of thinking about work, I thought I would dedicate some down-time to trying to understand a physics concept known as the Fine-structure Constant. This revolves around the number 137, a number that has obsessed physicist’s and mystics for centuries and is said to hold the answer to the universe! So, I figured cracking this mystery would be a good use of a couple of hours of my time. To cut a long story short, in less than an hour, I had concluded that this stuff was way over my head! As a result, I decided to, instead, revert to form and dedicate some time to thinking about something I understand a lot more about; structured products. Whilst there are many improved aspects of the UK structured products sector that we can point to and confidently say “that is a result of our influence”, I wondered if I could improve on an already exceptionally good concept. We regularly recommend utilising growth orientated investments to provide capital to top up everyday spending accounts but I know there’s something especially comforting about having income paying investments. There were several reasons why it had been many years since we had been able to offer a good income structured product, so I decided to set my mind to trying to come up with something new, innovative and income paying for clients. This is something I try to do regularly but let us just say that, on this particular night my universe was more aligned to my area of expertise than to theoretical physics. I had a moment of clarity for a new solution. It was so obvious that I couldn’t comprehend why I hadn’t come up with it previously. I grabbed the pen and pad from the hotel desk and frantically started jotting down numbers. Modern technology meant that I didn’t just have the benefit of a calculator on my phone but also access to all the information I needed to check out whether I’d missed something. It seemed I hadn’t. An hour or so later, I had written a rather excited, lengthy email to a colleague explaining the concept and the numbers and logic behind it. And then I got on with my holiday. It has taken a year to turn the idea from that night into a reality, but in that time, I believe the changes to the investment and savings landscape have made it an even more attractive concept. Today I am delighted to be able to offer our clients that investment, details of which are on pages 8 through 11. Please tell a friend about this

5 12 34 5 67 89 1 23 456 78 9 8 7 1 1 2 34 5 67 8 9 3 12 3 4 5 67 8 9 12 3 4 5 6 78 9 12 34 5 67 89 1 23 456 78 9 3 12 3 45 6 7 89 1 23 4 56 7 8 9 1 2 34 5 67 8 9 1 2 3 45 6 78 9 12 3 4 5 67 8 9 12 3 4 5 6 78 9 12 34 5 67 89 1 23 456 78 9 12 345 678 9 12 3 45 6 7 89 2 7 1 2 3 45 6 78 9 12 3 4 5 67 8 9 12 3 4 5 6 78 9 12 34 5 67 89 7 12 345 678 9 2 1 23 4 56 7 8 9 8 1 2 3 45 6 78 9 12 3 4 5 67 8 9 12 3 4 5 6 78 9 2 1 23 456 78 9 12 345 678 9 12 3 45 6 7 89 1 23 4 56 7 8 9 1 2 34 5 67 8 9 9 4 12 3 4 5 6 78 9 12 34 5 67 89 9 5 12 3 45 6 7 89 1 23 4 56 7 8 9 1 7 12 3 4 5 67 8 9 12 3 4 5 6 78 9 12 34 5 67 89 1 23 456 78 9 4 12 3 45 6 7 89 8 1 2 34 5 67 8 9 1 2 3 45 6 78 9 12 3 4 5 67 8 9 12 3 4 5 6 78 9 12 34 5 67 89 1 23 456 78 9 12 345 678 9 12 3 45 6 7 89 1 23 4 56 7 8 9 4 1 2 3 45 6 78 9 12 3 4 5 67 8 9 4 9 1 23 456 78 9 1 12 3 45 6 7 89 1 23 4 56 7 8 9 6 1 2 3 45 6 78 9 8 Grid n°4942 hard A number may not appear twice in the same row or in the same column or in any of the nine 3x3 subregions. Sudoku When you’ve finished reading the Lowes magazine why not try your hand at this issue’s Sudoku. 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.

investment and Lowes – they might not know about it, or where to turn to for advice, without your recommendation. You know we won’t let them, or you down. Ian H Lowes, Managing Director

Source: www.printmysudoku.com

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

Monitoring your pension fund size

THE AMOUNT THAT PEOPLE CAN HAVE IN THEIR pension in a tax-favoured environment (The Lifetime Allowance), was increased from April in line with inflation – the consumer price index (CPI) – to £1,073,100. Despite the increase, this is still £726,900 less than it was eight years ago. While a million pounds may seem a large amount, over a lifetime of saving it can be easier to reach than many people assume. There are 13 ways HMRC tests to see if an individual’s pension has breached the limit, so it is a complicated issue. There is a tax charge if the total value of your pension is more than the Lifetime Allowance. Latest figures available from HMRC show that 4,500 individuals exceeded the lifetime allowance in a year, paying a total tax charge of £185 million. Compare that to the 760 individuals who paid £13m in 2006/07 and the trend is clear. For anyone who potentially could reach the limit in the years ahead, planning in advance is essential and our Consultants can provide advice to help pension savers stay within the limit and find alternative retirement savings strategies to complement their pensions in their retirement strategy.

Breaching the limit- a simple calculation Average amount saved per year:

£20,000

(Aggregated over 30 years) Matching employer contribution:

£20,000 £40,000

Total per year:

Multiply by 30 years of contributions

x30

Total:

£1.2million

Annual Allowance update Lowes Consultant Chris Large says: Alongside the Lifetime Allowance, HMRC also imposes an Annual Allowance, being the annual limit on how much an individual can pay into a pension each tax year. Going over the limit could incur an income tax charge.

Financial comfort and resilience

THERE HAVE BEEN NUMEROUS INDEPENDENT STUDIES demonstrating the empirical value of using Independent Financial Advisers, in terms of building investment and savings wealth, when compared to those who have not received advice. But a recent study by Royal London has gone one step further to prove the value of advice in improving the emotional wellbeing of customers by making them feel more confident and financially resilient. The study conducted amongst over 4,000 people concluded that “Advised customers who have an ongoing relationship with their adviser are almost twice as likely to feel in control of their finances than those who don’t.” The survey showed that this has been particularly evident during the current coronavirus crisis, revealing that those with Independent Financial Advice were more prepared for and better able to weather the difficult financial climate than their non- advised counterparts. The fact that professional advice delivers so much more to customers than the expected financial benefits is not new to us – our bi-annual survey of our clients proves it year-on-year – but it is always gratifying to have it confirmed by external authorities.

In 2016 the government introduced tapering. This affected high earners and reduced what they could pay into a pension from £40,000 anywhere down to £10,000; a breach of the allowance limit incurring a charge. This has since been reduced to £4,000. This created issues for some groups, particularly doctors and surgeons, in the NHS pension scheme, who in taking on extra shifts found their payments (based on percentage of salary) into the scheme unintentionally breached the allowance. In April 2020 government sought to address this issue with changes to the system. Now, anyone with an income under £200,000 (previously £110,000) has the full £40,000 allowance. Incomes above this fall under adjusted income rules – which are complicated but allow for employer and personal pension contributions up to £240,000 – and could be entitled to up to £40,000 allowance. Anyone with adjusted income between £240,000 and £312,000 are subject to tapering, on a 1:2 ratio for every £2 over the limit.

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Lowes.co.uk

ADVICE

Lasting Power of Attorney now digital

SETTING UP A LASTING POWER OF ATTORNEY (LPA) has now become easier. With the ageing demographic of the UK and the high probability that current generations could live markedly longer than previous ones, there is an increased likelihood that some individuals will need someone to take charge of their affairs should they be unable to make decisions for themselves. We consider it important that as clients get older they put in place a Lasting Power of Attorney (LPA). An LPA comes in two forms: The first, the Financial LPA, deals with property and financial affairs. This lets the individual choose one or more individuals as attorneys to make decisions about money and property for them if they are unable to do so, for example, paying bills, collecting benefits, and selling property. The second type is the Health and Welfare LPA. This allows the attorney(s) to make decisions on behalf of that person regarding their welfare, for example on matters around medical care, where the person might live (such as a care home) and allowing or refusing medical treatment. A Health and Welfare LPA can only be used once the person has become mentally incapable of making these kinds of decisions for themselves. Good financial advice can assist with the Financial LPA, helping to assess the assets that a person – or couple, where one partner has become incapacitated – may have and how best they can be employed to provide for their needs. Financial advisers can be invaluable on the health and welfare side as well, helping to take measures to ensure that should the person’s health deteriorate and they need long-term care, for example, the proper finances are in place to help enable them to receive the best living accommodation, care and attention they are able to afford. Setting up an LPA used to be a tedious and lengthy, paper-based process. Recently, the process was made digital and now forms can be completed online, the only manual element being obtaining the

witnessed signatures of the people involved. The online tool will allow those acting as an attorney to provide a secure code, which will instantaneously confirm their status and authorise them to make decisions about the person’s welfare, money or property. Also, the new tool will maintain existing checks to protect the elderly and vulnerable, including whether someone has the legal right to act as an attorney.

Risks of not putting an LPA in place Lowes Consultant Tim Dawson says: Where an individual loses capacity and there is no LPA in place then the option of obtaining a Guardianship Order can be considered. This process is considerably more complex and costly as it involves going to the Court

of Protection for a decision to be reached on the person who can look after an individual’s affairs. The person appointed is referred to as a deputy. The deputy cannot make settlements of the individual’s property or exercise their powers of a trustee. Compared to putting an LPA in place in advance, the process to appoint a deputy is much more time consuming and expensive for all those involved. A well thought-out plan implemented when the person involved is fully aware and part of the decision-making process is far better than trying to deal with a situation which has already arisen, when the parties involved may have major financial, health and welfare implications to contend with, at what can be a very emotional time. Details about the online LPA can be found at: www.gov.uk/ power-of-attorney. If you would prefer to have help with setting up an LPA, while this is not a service Lowes offers, we can put you in touch with a recommended partner firm who will be able to undertake the process for you.

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5 Lowes.co.uk

PLANNING

How we help clients

OFTEN WE CAN BE RETICENT TO talk about our personal finances and yet there are times when it is very important that we do so. Lowes Consultant Robert Newton considers examples of how we help clients to discuss and make decisions about their financial wealth

Also important for couples is tax planning. When investing and saving, it can make sense to use available allowances and exemptions to the maximum limit, including, for example, ISAs, capital gains tax, and pensions payments. Talking through a joint strategy can often make better use of the available reliefs and allowances and help build wealth and a more secure financial future. Insurance protection should also be a discussion had by couples, again to better ensure financial security, especially where a couple may have children. It is also important that couples know where their respective Wills are and any insurance policies. Will writing is an essential part of estate planning. Where someone hasn’t left a will, the process of probate can take even longer. There are many reasons couples don’t discuss their finances beyond the superficial and unless something disturbs the status quo that can go on for years. In our experience, couples who jointly discuss their finances are more often in a better position to make effective decisions about their wealth, to grow and maintain it and can better prepare to pass it on to future generations. Talking between generations Another area where talking about wealth and finances can help considerably, is between the generations. While recent retirees have often benefitted from final salary pensions, few if any of the generations that will retire in the next 5-10 years and beyond will have the same level of benefit. It’s an entirely different pension landscape that they will be inhabiting. In future, individuals will need to save more and for longer for their retirement. A similar situation is being experienced in respect of the housing market, where it is now increasingly difficult for younger generations to get a foot on the property ladder. The ‘bank of mum and dad’ is now a common phrase used to describe how loans or gifts are being made to younger generations to help them buy a property. It has never been more important to talk to sons and daughters and grandchildren about their finances and saving and investing for the future, whether that is for 10 year goals or property purchase or retirement in 40 years’ time. Understanding the power of compound interest and cumulative return can help put saving and investing into a new perspective. But choosing the right pensions and investment vehicles is important as is tax efficient saving/investing. Talking about money can help prepare upcoming generations for their financial futures, hopefully avoiding unnecessary debt and equipping them to make sensible decisions around money in, money out and cultivating a savings and investment mindset. Talking about estate planning There are numerous aspects to estate planning which will require discussion amongst couples, family and, we suggest, with an Independent Financial Adviser. While most people will want to pass on some of their wealth to their beneficiaries, many also feel the need to retain control

Fundamentally, human beings are social animals, which means we like to talk to one another and share stories. And in the age of social media it is far easier to do that and with more people than ever before. And yet, when it comes to one of the most important topics of all, money, in particular our personal finances, often we can feel inhibited, not even discussing it with our nearest and dearest. Yet, we make better decisions and often reach better outcomes when we do talk about the things affecting us and so better understand them. Saving, investing, pensions and tax are important elements of our lives but often are complex to deal with. More often than not they will need to be discussed between couples and amongst families, and also with professional advisers. To my mind, if more of us were able to talk about money not only would many of us be wealthier than we are in financial terms but we could also be richer in terms of our outlook on life and our relationships. Talking between couples As Consultants where we most commonly see the impact of not talking about money is between couples, especially, where one person tends to deal with all the finances. While we might want to keep some finances personal to us as individuals, where a set of finances affect a couple jointly there are benefits to talking about them. It makes sense, for example, for couples to both know their monthly outgoings, how and when they are paid and from where. On numerous occasions over the years Lowes Consultants have been asked to help a recently bereaved widow/widower deal with their finances because their partner had always dealt with the household accounts. This can be anything from helping to sort out paying utility companies to dealing with current, savings and investment accounts. In many of these situations, if the couple had regularly discussed their finances, and had both their names on the utility bills, mortgage documents and had joint accounts, it would have saved huge inconvenience, upset and sadness at a time when the person left behind was already emotionally vulnerable. Where a bank or savings account is in a single name, it is frozen until probate and the executors of the person’s estate can access it. That can take too long, especially where household bills are lining up to be paid. What we recommend for this kind of situation is setting up a joint account for household payments and either keeping enough cash in it to meet the household bills for at least three months or more, or setting up a separate joint savings account to do the same. This ensures the person left behind can meet the household expenses while all the paperwork is gone through.

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6 Lowes.co.uk

Lowes Consultants have collective experience gained over almost 50 years of talking to people about their finances and helping them better understand and manage their wealth, both for their benefit and that of future generations. One of our skills as Consultants is getting people to talk about their finances and so better plan for their financial security and future. Personal finances can often be viewed in silos. Our role is to look at an individual’s or a couple’s finances in the round and to help provide a comprehensive picture of their accumulated wealth to help them see how to continue to grow and maintain that wealth, and where appropriate, spend it living the life they would want to lead. Likewise, what we want our money to do for us can be an emotional subject. Concerns around not accumulating enough for an enjoyable retirement, not having enough money in later life, or not being able to pass on wealth to loved ones, are issues we talk about with clients on a regular basis. It is also easy to become entrenched in our way of thinking. Sometimes people continue to keep saving and spend frugally because that is what they have done throughout their lives. As Consultants there is no better feeling than helping someone to realise that with proper management of their wealth, they have sufficient to live the life they want and help their family, or give to charity, when they thought the opposite was true. Talking about our personal finances and planning ahead for life’s eventualities, supported by sound professional advice, can both relieve stress at key points in our lives as well as ensure the right decisions are made in respect of our financial futures. If you or someone you know would benefit from talking with a Lowes Consultant about personal finance, call 0191 281 8811 and we will arrange a free initial consultation.

of their wealth to meet any unexpected eventualities, notably potential care costs. This can cause emotional conflict within people. On a practical level, paying inheritance tax (IHT) unnecessarily is always a primary concern. There are various ways we can pass on our wealth while mitigating against IHT, including gifting it outright, putting money into trust and passing on money in a pension. But this is a complex area and will often require specialist advice. We have found that talking through estate planning and inheritance plans with intended beneficiaries can help manage expectations and can engender unexpected support, which can often make people feel much better about their plans. Likewise, having the benefit of Independent Financial Advice, can help formulate a financial plan and ensure it is progressed effectively and smoothly. Keeping personal finances personal While we encourage open discussion of finances, this is not to say that some finances should not be kept personal. What we suggest is addressing the areas where it makes sense to talk, to avoid a widow not being able to pay the gas bill, to encourage children and grandchildren to save for their futures, and to ensure wealth is passed on in the best way possible. Clearly, everyone’s circumstances will be different and will need to be dealt with on an individual basis but, in our experience, talking about our finances inevitably leads to better decisions and better outcomes at the time or further down the road. Talk to an Independent Financial Adviser Whether discussing wealth on an individual basis, as a couple, or as a family, the guidance and advice of an Independent Financial Adviser can be invaluable.

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7 Lowes.co.uk

INVESTMENT

BEING AT THE FOREFRONT OF THE UK STRUCTURED product sector not only means Lowes can bring our clients exceptional investments not available to the wider market, it also means we consult with the providers over sector development, with a view to further improve what has already evolved to be an exceptional investment area. We have consulted, at length over the latest sector evolution, the introduction of the FTSE Custom 100 Synthetic 3.5% Fixed Dividend Index (FTSE CSDI), something that we expect to become widely utilised as the underlying for many structured products going forward, and for good reason. In the UK retail structured products sector the FTSE 100 Index has been the most commonly utilised underlying, accounting for 67% of issued plans in the previous decade (2010 – 2019). The index is comprised of the 100 largest companies listed on the London Stock Exchange, weighted by their size and represents approximately 81% of the value of the UK’s stock market. Linking the performance of structured products to the performance of the FTSE 100 Index allows investors exposure to the UK equity market, via its most widely quoted benchmark. The FTSE 100 Index is however, a ‘price return’ index, meaning that it only considers price movements of shares that it consists of – it does not reflect the dividends paid out by these companies. The counterparty to a FTSE 100 Index linked structured product will however, base their terms on, amongst other things, the anticipated dividend yield that the shares in the Index are expected to produce over the holding period. This requires a degree of forecasting and it is not unreasonable to expect the bank to err on the side of caution. As a result of the Covid-19 pandemic, indications are that more recent dividend estimates, even after accounting for a margin of error have proved to be a little on the high side. The market weighted dividend yield from the shares in the FTSE 100 in 2019 was 4.35% and the Sector evolution: introducing the FTSE CSDI

latest forecast yield for 2020 as a full year is now 3.5%, which, coincidentally, is in line with the twenty-year average. This recent decrease, coupled with a higher than normal degree of uncertainty, makes forecasting more difficult, which means that the banks will build in a higher than usual margin for error. This has therefore played a significant role in the returns being offered on FTSE 100 Index linked structures being substantially lower than they have been. The FTSE CSDI was created by FTSE Russell, the same calculation agent that publishes the FTSE 100 Index, to provide a solution. It aims to closely replicate the performance of the same 100 companies but after including the dividends – the equivalent to the FTSE 100 ‘total return’ index, from which, a constant annual dividend of 3.5% is deducted. The FTSE CSDI index may therefore be expected to perform in a similar way to the FTSE 100 Index although, it will slightly underperform if the total dividend yield transpires to be less than 3.5%. The correlation of FTSE CDSI to the FTSE 100 over a 10-year simulated back-test is 99.86%. By removing the uncertainty of relying on future dividends, the issuing banks may face lower costs and risks. The risk, or even the expectation that dividends will be lower than 3.5% and vice- versa is, in turn, accepted by the structured product investor but the acceptance of this, together with the cost saving arising from the issuer not having to make assumptions on the dividends, ultimately leads to greater potential returns for the investor. The net result is that even if the performance of the FTSE CSDI slightly lags that of the FTSE 100, we believe that this should be adequately compensated for in the comparatively higher potential returns offered to structured product investors. The FTSE CSDI will be the underlying for Mariana 10:10 Plans going forward and we expect to see it utilised in many other new issues before long.

Whilst the FTSE 100 Index will serve as a broad proxy for the performance of the FTSE CSDI the actual index levels are published on FTSERussell.com and we will also keep track of the index levels on our own SP-Perspective.com.

FTSE CSDI: Historical performance vs. 100 Price Return Index (20 years)

140

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100

80

60

40

FTSE CSDI Rebased FTSE 100 Rebased

Source: Mariana Capital, 17 September 2020. The FTSE CSDI was launched on 1 July 2020, and the chart above therefore includes simulated historical performance up until this date.

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0

Index Level (both indices rebased to 100)

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2010

2012

2014

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2018

Year

Simulated past performance is not a guide to future performance.

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8 Lowes.co.uk

Another First...

Whilst you should only rely upon the product literature for full details the investment is summarised as follows and overleaf: Linked to the performance of the FTSE CSDI Index (which itself is very closely correlated to the FTSE 100 – see page 8 for details) Closes 11 th December (25 th November for ISA Transfers) but may be oversubscribed sooner Investment start: 18 th December 2020 0.75% income payable each quarterly observation date the index is above 70% of initial level First possible maturity after 3 years and quarterly thereafter Maturity triggered by the index being up by 5% or more 12% gain payable if maturity triggered at third anniversary 1% more (not compounded) for each further quarter year. i.e. maturity at 4.5 years pays 18% 10-year maximum term Capital at risk barrier: 70% of the 18 th December 2020 Index level Capital at risk barrier observation date: 18 th December 2030 (only if not matured sooner) Minimum Investment £10,000 Counterparty: Morgan Stanley International Investment method: ISA / ISA transfer, Individual, Joint, SIPP, Trust, Corporate, Partnership Individual / Joint income taxed as Savings Income and gains taxable under Capital Gains Tax only if annual gains from all sources exceed £12.300* Cancelation rights: 14 days Can be surrendered from month one but penalties and loss will result Can be gifted, bequeathed, and transferred under probate

Maximum10yearoneweekPlan LinkedtotheperformanceoftheFTSE™Custom 100Synthetic3.5%Dividend Index (“FTSECSDI”) Paymentof incomeandgrowthcoupon conditionalontheperformanceoftheunderlying index Potential Incomeof0.75% perquarter (3%p.a.) PotentialReturnof1% foreachquarterthePlan hasrun (4%p.a.) ifakickoutoccurs FirstKickOutobservationattheendofyear3 Investing inthePlanputsyourCapitalatRisk Underlying investments issuedbyMorgan Stanley&Co. Internationalplc ThePlan issubjecttoCounterpartyRisk

Mariana 10:10 Income and GrowthPlan December 2020

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IN RECENT MONTHS LOWES SECURED EXCLUSIVE terms for structured autocall contracts with both Barclays and HSBC as counterparties both of which proved extremely popular. Thank you to all clients who took advantage of those offers – we are as confident as we can be that those investments will deliver the attractive, defined returns. Those structures were FTSE 100 linked, capital-at-risk autocall or kick-out contracts; the world first of this type of investment was launched in June 2003 and it was something we recommended to our clients back then. That first investment ultimately matured positively as have over 1,000 such investments, since then, with just 12 others failing to give a positive outcome. Whilst we obviously really like autocalls and will continue to utilise them in portfolios, we recognise that having to wait until a triggered maturity at some anniversary in the future isn’t ideal for everyone. The 10:10 Income & Growth Plan overcomes this by combining an autocall strategy with an income strategy, thereby providing a regular, quarterly income (provided the stock market doesn’t collapse by a further 30% or more) and the potential for an attractive gain at maturity after three years or more, if the market stages a moderate recovery. As ever, whilst a perfect outcome is not guaranteed, we believe this investment will meet expectations and is perfectly suited to the current investment climate, as part of a diversified portfolio. Up to 3% per annum income for a minimum of three years, plus up to 4% per annum growth. Capital at risk.

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*Based on current tax rules and reliefs which are subject to change.

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Closing Date: 11th December ISA Transfers: 25th November

The investment is designed to pay an income of 0.75% per quarter year (£75 per £10,000 invested) provided the FTSE CSDI is not more than 30% below the 18 December 2020 closing level on that quarterly observation date (in which case no income would be payable for that quarter). It will mature after 3 years, returning original capital plus a gain of 12% (£1,200 per £10,000 invested) if the index is 5% or more above the 18 December 2020 closing level. If not, it will mature on the next quarterly income observation date that the index is 5% above that level, adding a further 1% (£100 per £10,000 invested) potential gain for each quarter year that passes. The maximum term is ten years and if it has not matured by then and the index is more than 30% lower, invested capital will be reduced by that percentage i.e. if the index falls, does not recover and is half the December 2020 level on 18 December 2030 only £5,000 per £10,000 invested will be returned. Income and Growth Plan What to expect from the 10:10

Linked to the performance of the FTSE CSDI (very closely correlated to the the FTSE 100 - see page 8) Income - 0.75% income every quarter (3% per year max), unless the index has fallen by more than 30% as at quarterly income payment date. And Up to 4% per year growth (1% per quarter year the plan has run, subject to a minimum of 3 years and a maximum of 10) payable, together with return of capital and final income payment, on the first quarterly income observation date (from the 3 rd anniversary) that the index is 5% higher. Maximum duration: 10 years Capital protection barrier is 70% of initial index level, observed only at the end of ten years if the plan hasn’t matured sooner. Counterparty: Morgan Stanley International. Returns of income and capital are dependent upon the bank’s continued solvency. Key dates: Closing Date: 11 th December ISA Transfers: 25 th November Direct Investment with cheque applications: 7 th December SIPP/Pension Investment: Contact us ASAP Based on levels at the time of writing, the market would need to fall to levels not seen since the darkest days of the financial crisis before income would be suspended and would only need to recovery to levels seen in June this year to mature positively.

What to expect?

Worst case scenario besides Morgan Stanley going bust, is if the market falls more than 30% in the first quarter and stays below there for a decade – the investment will pay no income and will mature after 10 years, returning a loss in line with the fall in the index over the term. Best case scenario is it runs for say, five or more years, while interest rates are low and when they start to recover, the market does too and then it matures, paying more than 20% gain, which should more than adequately combat the effective rate of inflation. Likely scenario, although this is not a forecast, is that it runs for between three and five years, paying 3% per annum income and then matures with between 12% and 20% gain. Possible scenario, the market crashes further taking us back to levels not seen since the darkest days of the financial crisis, no income will be paid until it recovers to be above a FTSE 100 equivalent of around 4250*. It recovers further over a number of years, albeit only to levels last seen in June this year, when it matures paying 4% per year it was in force. *Assumes an initial level equivalent to 6000 on FTSE 100.

Worst

Best

Likely

Possible

Note that this is a capital at risk investment.

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The 10:10 Income and Growth Plan summary flow chart

Investment start date: 18 December 2020 The closing level of the FTSE CSDI is recorded to give the Initial Index Level

On each quarterly observation... Is the closing level of the FTSE CSDI equal to, or above 70% of the Initial Index Level

YES

NO

Income of 0.75% is paid

No income payment for that quarter

NO

Has the plan been in force for three years or more?

YES

Is the FTSI CSDI at or above 105% of the Initial Index Level?

Is it the 10th anniversary?

NO

YES

Is the FTSE CSDI more than 30% below the Initial Index Level?

YES

NO

YES

The Plan will mature returning investors’ original capital in full, plus any income payment due in respect of that quarter, but with no additional gain

The Plan will mature returning investors’ original capital in full, in addition to a 1% gain for each quarter it was in force

The Plan will mature returning a loss to capital at a rate of 1% for every 1% the closing

level is below the Initial Index Level

How to Proceed If you would like to consider this investment further and even apply for a no obligation reservation of a proposed investment amount, please either visit Lowes.co.uk/exclusive, email marketing@Lowes.co.uk, return the response card included in this magazine or talk to your Lowes Consultant. On receipt of your request, we will provide you with the product literature to help you make an investment decision.

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RETIREMENT

Retirement - what if it’s not right for you?

FOR MANY PEOPLE THEIR WORKING LIFE IS AIMED AT A set retirement point, at which time they envisage giving up work completely and using their retirement pots – ideally a combination of pension(s), investments and savings – to fund a work-free lifestyle. However, in recent years the view on retirement has been changing. Not everyone wants that cut off point; some people prefer to stay active through work beyond retirement age, maybe reducing their hours or going part time, while they make that transition between work and full-time retirement. In fact, there is medical evidence that suggests a cliff-edge retirement date may not be healthy for us if work has been the main driver in our lives. Those who move best into retirement often have enjoyed a healthy balance between work, family and social lifestyle and simply shift that balance in early retirement years. While the State Pension Age is currently 66 years, rising to 67 in 2028, do you have to retire at that age? The simple answer to this is ‘No’. Nor do you have to draw your State Pension at that time. In the past companies were able to force their employees to retire at age 65 the ‘Default Retirement Age’ but this was phased out in 2011 following a campaign by Age UK. Some specific roles, for example police officers, have a compulsory retirement age, but there is no law that states at what age you must retire. Employers that continue to employ older workers can benefit from an individual’s experience and expertise that would otherwise be lost to the business. As well as keeping mentally and/or physically active, there can be financial advantages to staying in work – paying more into a pension and delaying drawing pension income in order to grow a pension pot being one benefit. An important point to note here is that as soon as you draw income from a pension your ability to pay into that or another pension going forward can be limited, from £40,000 to £4,000 a year. So, for example, someone who draws from one pension but continues working and becomes a member in the firm’s auto enrolment scheme, is limited to paying £4,000 a year and will incur tax charges by going above that. Hence, it can pay to seek financial advice around pensions and

Keeping your data safe WE REMIND OUR CLIENTS TO BE VIGILANT AGAINST scammers, particularly while the coronavirus situation persists. Research by Aegon has revealed that over 11 million people say they have had contact from scammers while three million have fallen victim to scams. Many millions of pounds in losses have been recorded by the national fraud reporting centre relating just to Coronavirus scams. Pensions are a key target for fraudsters – a cold call about transferring your pensions (now illegal in the UK) or an online approach, offering free pension advice or review, early access to a pension, an investment with guaranteed high returns, as well as pressure from the caller to make a decision, are key indicators of a scam. Other ways scammers obtain people’s financial details include phishing (emails purporting to be from valid companies asking for personal and financial details) and building convincing websites. Recent examples include emails seemingly from the government offering grants, fake NHS Test & Trace emails, and fake DVLA and TV Licensing emails. Criminals are becoming ever more resourceful. Our advice is to be wary of any approaches you are not expecting. Certainly, never give out personal details, especially financial information. We would also warn against sending personal and confidential information by unsecure email. Keep your data safe. If you do find yourself on the end of a suspect phone call, it is important to remember that you are in control. Don’t be pressured into taking action of any kind. These are ruthless people who care only about stealing your money. And should you think an investment or savings offer is genuine, please contact Lowes first before committing yourself to any transaction.

tax when working post retirement age. You can check your State Pension Age at: www.gov.uk/state-pension-age.

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WE TALK ABOUT THE LOWES FAMILY AND WE ARE VERY much that – many of our Consultants and support staff have been with us for decades. That is how we deliver financial advice in the way that we do: Personal finances cared for personally. It also means that some of our longstanding Consultants have either reached retirement age or are approaching it. At the same time, we are seeing a growing need and demand for Independent Financial Advice. In many ways the Covid-19 crisis has focussed attention on the need to put our finances in proper shape – not least when it comes to tax and inheritance issues. Lowes has built its reputation on delivering personal finances in a personal, approachable way. We want that to continue so we took the decision to build our own in-house Academy to train and develop the Independent Financial Advisers and technicians of the future. We have launched the Lowes Financial Academy, which will take candidates from scratch through a training and development programme to gain the qualifications they need to become sector technicians. The training will be supported by some of the most highly qualified people in the profession. As well as playing an incredibly important and valuable role in people’s lives, being an Independent Financial Adviser can be a highly satisfying career. Our Consultants consistently say that the reason they do the job is the satisfaction of helping people build their wealth and achieve the financial security they desire. Through the Lowes Financial Academy our aim is to help inspire, motivate and encourage the next generation of financial advisers. Thinking ahead

We want to promote Independent Financial Advice as a fantastic career choice and to give people the pathway, learning materials and support they need to pass their exams and to pursue a successful career as an adviser. We are providing weekly training, delivered online by dedicated tutors via live webinars, with the candidates working through digestible workbooks in between, aimed at taking them through to achieving the Chartered Insurance Institute (CII) Level 4 Diploma qualification in Regulated Financial Planning. The weekly webinars will allow participants to ask any questions about the current and previous week’s material and they will be complemented by exam-style questions, incorporated throughout the course, focussed on the current and previous weeks’ learning, to help candidates prepare for their exam sittings. The course is open to anyone and is designed so that no matter what level of financial knowledge and ability a person has, they can work through the training programme to become an Adviser, or technician. This is an exciting step for Lowes and illustrative of our commitment to providing the very best advice for our clients both now and in the future.

If you know someone who would like to consider a career in financial services and would benefit from our programme, they can find out more information at LowesAcademy.co.uk or they can call 0191 281 8811.

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