Lowes Magazine Issue 118

Issue 118

“You may not control all the events that happen to you, but you can decide not to be reduced by them.” Maya Angelou

Allowances

nces ts (ISA)

INSIDE TRACK 2021-2022 VAT

limit

£20,000

Standard rate

accounts 31.11.2019 18-40 saving to purchase

£9,000 £200pm

2021-2022 However, VAT is reduced from 20% to 5% on leisure and hospitality between 15.07.2020 and 30.09.2021. From 01.10.2021 to 31.03.2022 the reduced rate will increase to 12.5%. Corporation Tax

COMMENT

£4,000 stor can receive a government bonus of 25% per year. s par t of the overall annual allowance.

Think ISA IT MAY SEEM COUNTER-INTUITIVE TO BE TALKING about putting money into an ISA straight after the end of the tax year but it can make more sense than waiting another year to invest. By investing now the ISA can start to benefit from 12 months additional market exposure that can add up to a considerable difference in returns over the years. This is particularly so where markets are recovering and the money would otherwise be held in a cash account, paying a pittance in interest with returns largely eroded by inflation. It can also establish a good habit, which hopefully can be maintained year-on-year. 2020-2021 2021-2022 0% £0 - £5,000 £0 - £5,000 20% £0 - £37,500 £0 - £37,700 40% £37,501 - £150,000 £37,701 - £150,000 45% Over £150,000 Over £150,000 7.5% Over the £2,000 Over the £2,000 dividend allowance dividend allowance 32.5% Over the £2,000 Over the £2,000 dividend allowance dividend allowance 38.1% Over the £2,000 Over the £2,000 dividend allowance dividend allowance 20% £0 - £1,000 £0 - £1,000 45% £1,001+ 2020-2021 2021-2022 £12,500 £12,570 £1,000 £1,000 £500 £500 £2,000 £2,000 £1,000 £1,000 £1,000 £1,000 £9,075 £9,125 £3,510 £3,530 £2,500 £2,520 £1,250 £1,260

20%

Main and small profit rate

Tax tables WE ARE PLEASED TO BE ABLE to provide our annual Tax Tables booklet with this issue of the magazine. If you would like further copies to pass on to family, friends or colleagues, please call 0191 281 8811 or email Contact@Lowes.co.uk £200,000 £2,000,000 2021-2022 £21.15 per week £14.00 per week £96.35 per week First 6 weeks then Company car charges based on CO2 emissions: Electric, Hybrid, Petrol & Diesel: % of list price CO2 emissions (g/km) 1 Electric range figure (miles) 0 NA 1 1-50 >130 2 1-50 70-129 5 1-50 40-69 8 8 1-50 30-39 12 12 1-50 <30 14 14 Electric & Hybrid: >51g/km: +1% for each additional 1g/km Petrol & Diesel: 51-54 - 15 15 55-59 - 16 16 60-64 - 17 17 65-69 - 18 18 70-74 - 19 19 75 - 20 20 76-79 - 20 20 Petrol & Diesel: >80g/km: +1%, to a maximum of 37%, for each additional 1g/km Diesel cars: Add 4% to the ‘% of list price’ up to a maximum of 37%. 1 For cars in the 1-50/km of the CO2 emissions band, the ‘electric range figure’ determines the appropriate percentage. The electric range figure in miles is the equivalent number of kilometres specified in an EC cer tificate of conformity, as being the maximum distance for which the car can be driven in electric mode without recharging the battery. NB: The taxable benefit is the relevant rate multiplied by the list price of the car.

2021-2022

eme 3

19%

Threat and opportunity horizons IN LESS THAN EIGHTEEN MONTHS THE WORLD WENT FROM identifying a new virus, to implementing a global immunisation programme. There are of course many things that could have been done better and many lives that could have been saved, but the overall achievement has been phenomenal and led many to ask what else can we do? Whilst the possibilities are endless, and many pioneers are driving forward, the next worldwide effort is again, likely to be in response to a threat. Beyond pandemics, threats to humanity, or at least modern civilization, are numerate. Environmental threats are aplenty; whilst there has been a long focus on air pollution and the destruction of rainforests, more airtime of late has been afforded to the impact of plastic pollution and the choking of the oceans. Plastic micro particles have been found in every living creature, even at the deepest part of the ocean, in rain samples from across the globe and even in the snow falling in the Arctic. I fear this situation will get a lot worse before it gets better, and the long-term implications are unknown. For another significant threat we need to look up. Being on a rock hurtling through space comes with its own external risks, not least from other rocks but our technological advances are creating their own dangers. In the sixty years we have been sending things into space, we’ve done a pretty poor job of keeping our orbit clean. NASA estimates that there are over 520,000 pieces of debris at least the size of a bullet hurtling around the Earth at speeds of up to 17,500 mph. With 1,000 new satellites being launched each year, Earth’s orbit is becoming an increasingly busy and dangerous place. Not only does each piece of space junk have the potential to do immense damage to, or even destroy an operational satellite, or spacecraft, the chain reaction risk known as Kessler Syndrome, as highlighted in the 2013 movie Gravity, is an ever-present threat. In the extreme, such an outcome a few years from now could spell disaster for civilization as we know it, crippling internet technologies, bringing global transport to a standstill and sending us back decades, overnight. Thankfully, with threats also come opportunities. Avoiding the serious threats to our planet is starting to attract investment and could become very big business, very soon, as we start to make initial inroads into cleaning up our own backyard – inner and outer atmosphere. Hopefully, we have seen the last of pandemics in our lifetimes and will not witness anything worse. As immunisation programmes take effect, so the world is beginning to recover. We can expect that healthcare, environmental and related industries will see raised profiles over the next few years. What else can we do? Innovative thinking is achieving new milestones. After 50-odd missions to Mars over the years, a large proportion of which were lost for one reason or another, we have now witnessed humanity deploy the first aircraft on our nearest neighbouring planet and many of us will live to witness the first manned missions there, potentially within the decade. Science fiction is becoming science fact. Part of our role as Independent Financial Advisers is to spot the opportunities these situations present for our clients. That said, out-with the Lowes Changing World Portfolio, which has a heavy technology bias, our investment philosophy is not exceptionally adventurous, seeking instead to achieve reasonable returns without exposing the capital to undue risk.

Income Tax (England, Wales and NI) Rate Star ting rate 1

£100,000 eceived on qualifying VCT investments are exempt from 1 million is invested in knowledge-intensive companies.

Basic rate Higher rate

2021-2022 2022-2025

Additional rate

Basic rate on dividends

2

2

Higher rate on dividends

5

Additional (and Trust 2 ) rate on dividends

Fernwood House · Jesmond Newcastle upon Tyne · NE2 1TL Tel: 0191 281 8811 www.Lowes.co.uk Email: enquiry@Lowes.co.uk

Trust standard rate

Trust rate

£1,001+ 1 For savings income only. Non-savings income represents the first slice of income for the purposes of the above. 2 Trusts do not benefit from the £2,000 dividend allowance and dividends received within the £1,000 standard rate will be taxed at 7.5% and 38.1% above the standard rate. Personal Allowances

d Paternity (ShPP) & Adoption (SAP)

Grid n°100019821 medium Sudoku We hope you enjoy this mind teaser – our latest Sudoku puzzle. 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. It’s also having someone regularly reviewing their finances to ensure they stay on track. Someone with their best interests at heart. Why people choose advice A RECENT SURVEY FOR THE ASSURER CANADA Life by financial services research company AKG, revealed three main reasons people seek financial advice. These were: 1 Peace of mind provided by their relationship with an adviser 2 Access to ongoing support 3 Ideas on finances/savings/investments. We see the order of priority in the answers as telling and reflecting a fundamental truth about financial advice. People seek advice not so much to know which investments to put money into, although, of course, that is a core function of the service, but rather to have confidence that their finances are being looked after professionally at all levels and across all areas. It’s knowing not just that their money is working hard for them in the right investment, pension or savings vehicles, but the knowledge that they have access to the experience and expertise of a professional in dealing with complicated areas like tax, passing on wealth, and planning for needs in retirement and later life. This enables people to have a clearer picture of their financial affairs and to plan for the future.

average weekly earnings

Personal allowance 1 Personal savings allowance – basic rate taxpayer 2 Personal savings allowance

revious tax year, you can recover 92% ax month. If Class 1 NICs are less than er 103% of the total of all payments.

– higher rate taxpayer 2 Dividend allowance 2 Proper ty Allowance 3 Trading Allowance 3 Married/civil par tner allowance 4 Married/civil par tner basic allowance

Tax Tables 2021 - 2022

Blind person’s allowance

Transferable personal allowance for

spouse/civil par tners 5 1 Reduced by £1 for every £2 over £100,000. 2 These bands are taxed at 0% and form par t of an individual’s basic/higher rate limits. 3 Where gross proper ty income and/or gross trading income is in excess of these amounts, recipients can choose to take the £1,000 allowance as a deduction against their gross income instead of deducting actual expenses to arrive at their taxable income figure. 4 For those born before 6/4/1935. This is reduced by £1 for every £2 of income over £30,400. 5 Transferred between spouses/civil par tners provided neither suffer tax over basic rate tax and are not in receipt of married couple’s allowance.

E&OA

Child Trusts Funds ACCORDING TO REPORTS, there are around 200,000 Child Trusts Funds set up for children when they were younger (between 2002 and 2011), which have yet to be claimed by those who have attained age 18. As each, on average, is worth £2,000, that’s a considerable £400

Secure email

LOWES HAS INTRODUCED A NEW EMAIL SYSTEM FOR clients which uses military-grade encryption to help keep communications between us and our clients secure. There has been a reported increase in cybercrime during the pandemic, as criminals have taken advantage of individual’s greater use of online services. Once criminals have access to emails they can commit identity theft and attempt fraud. Our new system allows us to send you emails that are secure from hackers. You will be able to read and send secure emails to Lowes using the portal. How it works: The emails are encrypted in transit and can only be read within the Egress portal. You will need to use your email address to register for the portal the first time you receive a secure email. Subsequently, you will log into the portal when you wish to communicate with Lowes securely: Lowes.co.uk/securemail

million unclaimed. At a time when many young people are struggling financially, having been

furloughed or made redundant, £2,000 could be a useful monetary boost.

Individuals can find out where their Child Trust Fund is by filling in a form on the HMRC website (gov.uk/child-trust-funds/ find-a-child-trust-fund) .

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

7 2

8

Follow us for company updates

Gross Rate

Contact

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1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9

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3 6

5

1

Unrestricted instant access accounts Online £1 - £500,000

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1 2 3 4 5 6 7 8 9

1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9

@LowesFinancial

Paragon

Limited Edition Easy Access

0.41% www.paragonbank.co.uk

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Fixed rate bonds Online £1,000 - £85,000 Ahli United Bank UK (Raisin)

2

Lowes Financial Management

1 year Fixed Term Deposit

0.65%

www.raisin.co.uk

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This is for one simple reason – history tells us that nothing runs smoothly all the time, there can be unexpected events, unintended consequences and everything we do – including dealing with a pandemic, space exploration and investing in the stockmarkets – requires careful risk assessment and long-term thinking and horizons. Ian H Lowes, Managing Director

Online

£1,000 - £85,000

QIB UK (Raisin)

2 years Fixed Term Deposit

0.80% *

www.raisin.co.uk

2

9

Online £1,000 - £1 million

BLME

2 Year Premier Deposit Account

0.80% *

www.blme.com

1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9

1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9

1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9 8 5 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9 7 1 2 3 4 5 6 7 8 9 9 1 2 3 4 5 6 7 8 9

Online £1,000 - £250,000

Zopa

3 years Fixed Term Savings

0.91%

www.zopa.com

* This is the Expected Profit Rate (EPR). Measures of inflation - The average change in prices of goods and services over a 12 month period to February 2021 Retail Prices Index (RPI) 1.4% Consumer Prices Index (CPI) 0.4%

7

9

6 5 3

Covershot: Ingenuity Mars Helicopter in Flight (Artist’s Concept) NASA/JPL-Caltech

Sources: Providers’ websites, Office for National Statistics, www.thisismoney.co.uk, www.moneysupermarket.com, www.moneyfacts.co.uk 12/04/2021. All accounts subject to terms and conditions.

1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9

1 2 3 4 5 6 7 8 9

1 2 3 4 5 6 7 8 9

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 118 · Published April 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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TAX

PENSIONS

PENSION FREEDOMS HAVE ALLOWED THOSE OVER 55 the flexibility to withdraw their pension as they wish, and the latest data from HMRC suggests an increasing number of people have been making use of this facility, potentially due to the impact of the COVID-19 pandemic. The pandemic has affected people’s finances in different ways. For many it has made for harder times and with the potential for unemployment to rise further over coming months, the temptation can be to withdraw from a pension. This can be for our own needs but also to help out family. There are very strong reasons pensions should not be accessed until they are needed for their primary purpose, i.e. providing an income in retirement. This is particularly so in an age where the average life expectancy has been rising and pensions now need to last a lot longer than just a few decades ago and where State Pension provision is being changed in terms of when it is received and how much it will be worth in years to come. We strongly advise against accessing a pension pot without the benefit of Independent Financial Advice to help identify the potential risks from personal tax, future income and inheritance tax perspectives. Here are five key points to consider before early accessing a pension – which of themselves, serve to highlight the complexities involved. 1. Which pension to access? Many of us have more than one pension. These can be a mix of final salary and defined contribution. As such, they could have different benefits built in, such as a guaranteed rate or additional death benefits, or they could charge different fees and have different amounts held; the latter can affect the tax paid and whether the pension pot can be drawn with or without financial advice. 2. How do you want to access the pension? There are various options. You will need to consider how much you want to take and how frequently you wish to take it. 3. Should you just take the tax-free cash? People tend to think they have to take the 25% tax free lump sum in one go but in fact, you have flexibility over how much you withdraw. It is not always beneficial to take the full 25% in one go if you don’t have an immediate need. It could be better to take the tax-free cash out in stages. Remember also, the longer the money is kept invested, the longer it has to continue to grow and provide for your retirement. 4. Tax charges Withdrawing money from a pension can trigger the Money Purchase Annual Allowance (MPAA), which would immediately decrease the annual amount you can save into a pension to just £4,000 a year. If you are accessing a pension to help out in tough times but still want to work and plan to top up your pension at a later date, going over the £4,000 allowance would then generate a tax bill. 5. Pensions pots are now useful tools in inheritance tax mitigation They provide generous death benefits and notably, they are not subject to inheritance tax. This can make pensions the very last asset you want to access if you plan to leave a legacy for your children or grandchildren. Dangers of early accessing pension pots

Tax relief when helping family

DURING THE CORONAVIRUS PANDEMIC MONETARY support from family has often provided a financial lifeline for people as redundancies and furloughing have taken a toll on the employment market. This situation is likely to continue in the months ahead – evidenced by the Chancellor extending a tapered furlough scheme until September – while the economy looks to get back on its feet. Tax mitigation is probably not foremost in a person’s mind when helping loved ones through tough times but there are ways to provide that support and help reduce inheritance tax bills for beneficiaries later down the line as well. One of the inheritance tax exemptions that can be overlooked when financial planning is the normal expenditure out of income exemption. As well as providing regular payments for the beneficiary, this can be useful in particular situations to help reduce tax liabilities, such as immediate relief from inheritance tax (IHT). The current rules allow for regular payments to be made as part of a person’s normal expenditure. They need to be habitual payments, made from surplus taxable income and leave the transferor with enough income to maintain their normal standard of living (ISA income, whilst not taxable, can be included). If these criteria are met, the payment (or gift) is considered to be immediately exempt from IHT and therefore, won’t be included in a person’s estate for IHT calculations. However, it is important to keep clear records to demonstrate to HMRC that these criteria have been met. Outside of the current pandemic situation, regular gifting can form a sensible core of a strategy for a range of life costs – including helping with education. It may also be an option worth considering for people who are at risk of exceeding their pension annual and lifetime allowances. This may be particularly relevant, since in the March 2021 Budget the Chancellor froze the lifetime

allowance at £1,073,100 until 2026, which means a growing number of people could begin to breach the limit over the next five years unless they take action. Combined with annual exempt gift of £3,000 per person, regular payments that are IHT exempt, can provide a useful option if helping out family members.

Reviewing our pensions Lowes Consultant Gavin Burton says: With people switching jobs several times throughout their career – the Association of British Insurers estimated nowadays people will have an average

Lowes Consultants can advise more on this subject if you think it would benefit your situation.

Lowes Consultant Tim Dawson says: Many people have mixed feelings around gifting, wanting to help out family but

of 11 jobs in their lifetime – there is the risk that they will end up with a trail of legacy pension pots scattered across different providers, with no single view of how they are performing or the fees they are paying. Examining our pension plans to ascertain the potential retirement income they will deliver, whether they are good value for money in terms of the fees charged and the terms of the pension, and, accordingly, whether we need to be changing our pension, consolidating them or simply saving more, should be part of a professional pension review. Lowes Consultants work with our dedicated Pensions Technical team to ensure our clients’ pensions arrangements are the right ones for their needs.

reluctant to leave themselves without the necessary funds to cover life events, like long term care, should they occur. This is natural and our advice is that gifting to family should only be considered for money that you know you do not need now and will not need in the future. Using the normal expenditure out of income tax exemption as part of a financial planning strategy, for example when building a legacy pot for children or grandchildren, by its very nature has to be money made from surplus income. However, it can be combined with a trust, which will allow the benefactor to retain control over a portion of money should it be required in the future, such as for long term care costs.

If you know someone who could benefit from talking about their pension arrangements, please have them call 0191 281 8811 and we will arrange a free consultation.

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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LOWES 50TH ANNIVERSARY

General Managers then and now

How has Lowes changed? Asked how Lowes has changed over their tenures, Caroline says what she has seen in her 34 years with Lowes has been the effect more of external events than any change to the fundamentals of the company. “The ethos and ethics of the organisation have always been strong and they haven’t changed from the beginning which is to put our clients’ interests first. If you base everything you do off of that principle, you will have a business that will stand the test of time. It’s why Lowes has been successful in attracting and keeping clients over its 50 year history.” Regulation, she reiterates, “has had a huge impact. The Regulator often puts out several new pieces of regulation every year and the company has to adapt to those changes. That can mean changes to admin, systems, processes and procedures.” The number of products have proliferated over the years also. “In the 1990s the choice of products was limited. Now, not only has the range increased but the solutions have become more complex. This means as a company we have to do a huge amount of research to ensure we are using the best solutions for our clients. How and what we report on has also increased enormously over the years. That requires more people and more resources. But that’s what it takes to be an Independent Financial Adviser doing the best for our clients.” Dawn concurs. What Lowes also does, she adds, is to look ahead to the future and what the company may need in one, five or 10 years’ time, to continue being successful. “To this end Lowes recently set up the Lowes Academy, a highly needed training programme for people seeking to advance their career or keen to enter the profession and from which Lowes could reap benefits too, as a pool for the Lowes Technicians and Consultants of the future.” Another reason for Lowes’ success, say both Caroline and Dawn, is Lowes’ ability to innovate. In the 1990s Ken Lowes launched the Lowes Defensive Strategy Fund, one of the first funds managed by an Independent Financial Advice company. During Ian Lowes’ management of the company, Lowes has become the industry’s expert in structured products, heavily influencing product design to the benefit of investors. Above everything else, they say, is the fact that Lowes has steadfastly stayed an Independent Financial Advice company. “People work very hard for their money and the only people who know how to make your money work best for you are those who are qualified and educated in that field and who have no bias as to where the money is invested. That means they always pick the right product or investment for the client’s needs,” Caroline says. “And as a company we stick to our knitting,” adds Dawn. “We are there to help our clients through the various stages of life, investing their money, planning for retirement and passing on of wealth to the next generation. It’s what we do best.”

How Caroline and Dawn joined Lowes Caroline has been with the company for 34 years. She joined Lowes in February 1987 starting as the assistant to the investment manager at the time, Melvyn Bell. “I’ve been lucky enough to grow with the company,” “There’s a satisfaction in getting the job done and moving on to the next challenge and working out how you’re going to solve that,” she says. “Exactly,” says Caroline. “Problem solving!” Challenges and satisfactions Asked what is the biggest challenge and what is the most enjoyable aspect of the General Manager role, Caroline and Dawn laugh and concur, it is the same answer: People. “A company is its people,” Caroline says. “So you will spend a large proportion of your time dealing with people; finding solutions to the problems they bring to you but also seeing them develop and grow as they stay with the company.” In an ever growing company, Dawn adds, it is also about keeping an eye on the bigger picture and stepping in to provide support and make decisions where needed.

CONTINUING THE CELEBRATION OF OUR 50TH anniversary, journalist Rob Kingsbury spoke to Caroline Robinson and Dawn McDonald, Lowes’ General Managers in the 1990s and now, about what the role entails, and how the company and the job have changed over the years. The obvious opening question to start the conversation with Caroline and Dawn is to ask what exactly the role of General Manager entails. “If I had to write the job description for the General Manager role in the early 1990s it would be: ‘To communicate with the Managing Director all the issues that could affect the operation of the company,’ says Caroline, General Manager at the company from 1993 to 2003 and now a non-executive director on the Lowes board. “But in a nutshell it is problem solving. Independent Financial Advice is a people business that is highly regulated and constantly changing, which means there is always something new to deal with and new ways of working which have to be incorporated into the business.” Day-to-day in the 1990s, that meant making sure that the business had everything it needed to function and every department the resources to operate, she says. “As a small company that meant being very hands on. When we needed a Fire Certificate, I had to find out how we went about doing that and ensuring all the necessary work was done so we got the certificate. When we moved offices it meant shifting furniture. It meant mucking in.” It also required having a good knowledge of the financial services profession and the bigger picture. “I’d be looking at the latest developments, particularly in terms of technology, and thinking about where the trends were headed and what that meant for Lowes as a company, the direction we had to take to ensure we both improved and progressed. “Of course, then I had to persuade people that it was the right way to go,” she adds with a smile. The GM role now So, is the role any different in 2021? “Likewise, primarily I’m supporting the Managing Director, Ian Lowes, in the running of the business,” says Dawn. “For me, the role is about the three Ps: Personnel, Projects and Problems/decisions. “In 2021 Lowes is a much larger and growing company, which can bring its own problems but also provide solutions. I’m lucky in that we have good departmental managers who tend to come to me with options not just problems. It’s working through what are the best solutions and making decisions that are the best for the company and its clients. “For example, when we’re working on tax year end it can generate a lot more work for certain teams. Being larger we can bring in people from other departments to help out and keep things running smoothly for our clients. We have a good team ethos and that helps.” With over 90 people associated with Lowes, the personnel aspect has become a big part of the role, Dawn says. “As a growing company, recruitment and selection is an important part of what I do, as well as general personnel oversight.”

she says. “When I joined it was a small business, with just five Consultants and about the same number of support staff. I always loved solving problems and what was great about working in Lowes was that Ken Lowes, who was Managing Director at the time, let us have the freedom that if we saw something that could be changed to improve the business, we were empowered to do it.”

In 1993 Ken established a London office and moved to the capital, which was when he appointed Caroline as GM, holding the position until 2003 when she retired from working day-to- day and became a non-executive member of the board. Dawn joined Lowes in 2016 after working for some of the large companies in the profession, including Skandia and Brewin Dolphin. “I’d dealt with Lowes in my previous roles and in 1995 I joined the Lowes admin team on a night out, where, in fact, I met my husband to be, who was working in the Lowes technical department at the time,” she says. However, it was in 2016 that hearing about the General Manager opportunity, Dawn applied to join the company. “Obviously, I knew Lowes, its history and the reputation of the firm and with my experience I knew it was a role that would suit me well. I’ve not looked back since.”

From the project perspective, she adds, “the financial services profession is highly regulated and financial advice in particular, which means there is always some change coming around the corner.” 2018 proved an especially busy year for projects, as the General Data Protection Regulation (GDPR) came into effect, along with MiFID II, which was a specific set of regulations affecting the investment industry and investment advice. Both EU directives. “Putting all the necessary processes and procedures into place was about co-ordination and making sure everyone knew how the new rules would affect their role and what their responsibilities were going forward,” Dawn says. As with Caroline in the 1990s, Dawn says the job also is very hands on. “It’s been particularly so during Covid and lockdown as I’ve been one of the skeleton staff who have come into the office. It’s been very much a multi-tasking role, doing what needs to be done, whatever it is, on a day-to-day basis.”

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Do you know someone who would benefit from our investment management or other financial planning services? We would of course welcome any such referrals and to mark our 50 years in business, we have pledged to donate up to £50,000 to charity. Therefore, if your referral becomes a client of Lowes we will donate £50 to a chosen charity on their behalf, £50 on your behalf and a further £50 donation on behalf of Lowes – a total of £150 per referral! Please feel free to contact us on Contact@Lowes.co.uk, or reach out to our marketing team on 0191 281 8811 and advise them of any new client referrals.

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PLANNING

TAX

CHANCELLOR OF THE EXCHEQUER RISHI SUNAK’S March 2021 Budget turned out to be a big freeze as he announced tax rates, allowances and exemptions would be put on hold until 2026. It may have been difficult for the Chancellor to increase tax rates and cut allowances and exemptions at this budget without impacting the wider economy, yet he somehow had to start raising revenues in order to meet the ever mounting debt (£355 billion of debt in the first year of the pandemic and a potential £204 billion or more to be added in 2021) and the economy generating expenditure announced at the same time in the Budget. What he has done therefore, is to freeze personal tax rates for five years. The result of this will be to implement what is termed fiscal drag, which, as the economy recovers and incomes and investment returns rise, will gradually draw more and more people into paying higher rates of tax as well as become liable to pay inheritance tax, capital gains tax and so forth. In effect what the Chancellor has done is to find a way over time to raise more revenue through taxes without actually raising tax rates. The freezing of tax rates the Chancellor forecasts will raise an extra £990m by tax year 2025/26. Accordingly, tax planning will become far more important for more people over the next few years, if they are to mitigate the effects and ensure they do not pay more tax than they need to. 2021 Budget tax implications

Fund value now that will exceed Lifetime Allowance given set investment returns (assuming no further contributions are made) Investment growth 4% a year 5% a year 6% a year (net of charges) Current fund value with 10 years to retirement £833,000 £757,000 £689,000 Current fund value with 20 years to retirement £686,000 £567,000 £469,000 Assumes LTA stays as £1,073,100 until 5/4/26, increases at 2% a year thereafter Figures rounded Current fund value which will exceed Lifetime Allowance (with ongoing contributions of 10% a year of £80,000 salary) Investment growth 4% a year 5% a year 6% a year (net of charges) Current fund value with 10 years to retirement £758,000 £685,000 £620,000 Current fund value with 20 years to retirement £546,000 £438,000 £351,000 Assumes LTA stays as £1,073,100 until 5/4/26, increases at 2% a year thereafter Salary grows by 2.5% a year Figures rounded How savers could get caught by the frozen pension Lifetime Allowance According to pension provider Canada Life, a current pension pot of £469,000, with no further contributions, could breach the pension lifetime allowance in 20 years (if the LTA is frozen until April 2026 and then increases by 2% on average each year thereafter). A current pension pot worth £351,000, with ongoing contributions of 10% a year from someone earning £80,000 could breach the LTA in 20 years (if the LTA is frozen until April 2026 and then increases by 2% on average each year thereafter). A pension value of £1,073,100 today would secure an annual income of around £28,000 a year at age 65.

LOWES CONSULTANT MICHAEL STOWE outlines one of the areas where a client requires advice and Lowes is able to help. On this occasion, where a client wishes to pass on a pension to a beneficiary other than a spouse. First and foremost we take out a pension How we have helped clients Whether the beneficiary can access the pension without an income tax charge depends on the age 75 rule – see box. There are various considerations here, with which Lowes Consultants can help. Of utmost importance, is ensuring the assets outside the pension are sufficient enough to provide the required lifestyle without the pension payments. We have sophisticated software and processes that can make a proper and professional assessment of an individual’s circumstances and plot the potential for a sum of money to meet someone’s needs over their remaining lifetime.

Reviewing our pensions Lowes Consultant Daniel Waugh says: Perhaps one of the most contentious issues arising from the freezing of allowances is in relation to the Pensions Lifetime Allowance (LTA). This allows an individual to accrue up to £1,073,100 in a pension and benefit from tax relief.

plan to provide us with an income in retirement – hence the government incentivises pension contribution with tax relief. However, in current circumstances, often the importance of providing for family has risen up the agenda. While most people tend to bequeath their pension to their partner/spouse, sometimes, where there are sufficient other assets to support the spouse, a client will want to pass the pension fund to someone else they care about, such as adult children or grandchildren. And there can be several good reasons to look at this, where it may be needed. On death the majority of our assets fall into our estate and, where they exceed an individual’s nil rate band, currently £325,000 (plus up to £175,000 Residential Nil Rate Band in specific circumstances), they are subject to inheritance tax (IHT) – unless they are passed to a spouse or civil partner. However, in the vast majority of cases a pension can be passed to anyone without any IHT liability and in set circumstances without an income tax charge. Where the circumstances are right, this can make pensions very useful tools in passing on of wealth between the generations. It can makes sense, therefore if there are sufficient other assets to support the spouse, to pass the pension fund to someone else the client cares about, such as adult children or grandchildren. They receive it IHT-free and the money is kept out of the spouse’s estate when IHT is calculated.

These can forecast how long assets are likely to last using criteria such as inflation, projected investment growth and so on, set against income needs at various life stages – in retirement for example, we tend to spend more in early retirement, less as we grow older and maybe more again in later years if we need care.

Any money paid in over the top is subject to a tax charge. It is controversial because in 2020 many senior NHS staff working long hours during the pandemic, who paid a percentage of their earnings into a pension with an employer contribution too, were in danger of breaching the LTA limit. This tax charge effectively made it counterproductive on a financial level for them to put in the longer hours. A temporary measure was introduced by government at the time but this issue is now likely to raise its head again, and not just for NHS staff, over the next five years. LTA becomes more complicated where an individual may have several pension pots and a mix of final salary and personal (defined contribution) pensions. Lowes Consultants can help with financial planning strategies to help clients who are in danger of breaching the LTA.

If these circumstances may apply to you, your Lowes Consultant can talk through the financial and tax implications with you.

The age 75 rule The age 75 rule is that if a pension holder dies prior to age 75 the pension fund may be passed on to the nominated beneficiaries free of tax. If they die at age 75 or more, then the money the beneficiaries draw down from the pension will be subject to a tax charge which is based on their income tax position at that time.

Tables source: Canada Life (March 2021)

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INVESTING

Preferred Plan maturities THE FIRST QUARTER OF 2021 WAS YET another period that showcased the value of Lowes’ structured product selection. Can you help us spread the word? More people should know about structured products and the value they can bring to a portfolio. We feel that portfolios with structured products are more satisfying to hold and afford greater peace of mind, helping investors to focus on defined outcomes and ignore daily noise. Please share a copy of this magazine with a friend or neighbour, or refer them to Lowes.co.uk, or your usual Consultant and help them discover more about the value of Lowes and structured products. The table below shows the performance of the Lowes ‘Preferred’ structured products most commonly held by our clients, which matured in the first quarter of 2021. Beyond the Morgan Stanley deposit, which achieved its maximum potential of 30% interest because the FTSE 100 was higher over the six years, and the Hilbert, high risk share linked plan which only ran for six months, the others achieved annualised returns of between 5.7% and 8.1% over terms of 2, 3 and 4 years, despite the pandemic-induced market fall. The three Investec maturities were issues 1, 7 and 8 of the Investec/Lowes 8:8 Plan

MANAGING DIRECTOR IAN LOWES AND Compliance Director Barry Strathearn recently completed a Masters degree in Financial Planning and Business Management, putting them at an academic level above most in the profession. From its early days, Lowes has differentiated itself as an Independent Financial Adviser by the high level of importance placed on gaining qualifications and for many years not only has Lowes had some of the most qualified individuals in the profession but the firm was one of the first in the country to achieve Chartered status, which recognises the level of qualifications held within the firm. Managing Director Ian Lowes and Compliance Team spotlight

A Structured Product Milestone

Director Barry Strathearn have both held the highest of industry accolades, Fellow of the Personal Finance Society, for a number of years. So, in 2020 they decided to undertake a further formal qualification, namely a Masters degree (MSc) in Financial Planning and Business Management. In part this was a friendly rivalry between the two but primarily they undertook the additional qualification to ensure that as directors they were leading by example. It was Barry who first suggested the Masters degree as an option. “I’ve studied for a qualification pretty much every year over the past couple of decades and the Masters was a natural extension to the qualifications Ian and I held.” “I was reluctant at first,” Ian says, “because life is hectic enough running a financial planning business and it had been a while since I’d undertaken any formal education. However, Barry was persuasive.” Barry adds: “I pointed out that this would put Lowes directors amongst an elite number of people with the Masters qualification and also, that if I alone had the degree, then I would be the highest qualified director in the company.” The gauntlet had been laid down. They began the course in January 2020 and had made just two trips to University in Manchester before the pandemic took hold and the country went into lockdown. The university was forced to make substantial changes to its teaching structure as well as moving to a virtual environment for lectures. In addition, Ian and Barry were at the heart of moving the Lowes business from office based to operating remotely, with all the logistical, technological and personnel issues that raised. “There was a lot on our plates,” Ian says. Ian wrote his dissertation on structured products. “It is a subject I am passionate about, I know well and have written about extensively. I knew what I wanted to say in my dissertation, and one of the hardest parts was finding sources to support the facts, as I couldn’t reference my own articles.” Barry’s dissertation, ‘The culture of rewarding people in financial services’, covered the impact of coercion by the regulator on payment structures in the profession. They submitted their dissertations in December 2020. ““When we received our results, given everything that had been going on in the year, we were very pleased to be told we had been awarded Merits, the highest we expected in the circumstances,” Ian says. Asked how they feel about having achieved the Masters degree, both agree that “it was good to stretch ourselves both academically and on a practical level,” although the impact of the pandemic both on the course and running the business from home, “made it a harder journey than we both expected.” “Overall, it was a positive experience,” Ian adds, “and one which helps keep Lowes at the forefront of our profession.”

THE STRUCTURED PRODUCT MARKET HAS CONTINUED to evolve and develop over the years, with new and innovative structures for investors. The autocall is one such innovation. It first appeared in the market for advised investors in 2003, since then these products have grown in popularity to such an extent that they are now the most common vehicle in the structured product market. This is in part because the sector is well regulated, has become a lot less complex over the years, and many plans regularly outperform other investment products, while providing contingent capital protection against stock market falls. 2021 Milestone In February this year the market saw a milestone reached with the maturity of the 1,000th FTSE 100-linked capital-at-risk autocall in the UK retail structured product market. As a recognised expert in the structured product market it may come as no surprise that Lowes recommended the first autocall to many of our clients. We also have probably the most comprehensive set of data on product performance, and we have analysed all 1,000 autocall maturities from 2003 publishing the results in a review of the sector, which can be obtained from Lowes.co.uk/AutocallReview2021 . In terms of performance, the analysis shows that the mean annualised return was an inflation-busting 8.04% with the highest annualised gain at 16.2%. Only eight of the 1,000 maturities matured with no gain, returning capital only. There were none that matured at a loss*. This is an impressive performance by anyone’s standards, not least because the investments protect original capital at maturity from all but the most extreme circumstances and market conditions. We believe structured products per se and autocalls in particular, should be considered as part of any balanced portfolio. The most common maximum term for autocalls throughout most of the sector’s evolution was six years but in 2015, Lowes was instrumental in helping to change the market through the

8:8 Plan The first issue of the original Investec/Lowes 8:8 Plan matured on March 8, 2021, giving investors a gain of 22.5% plus the original capital - this despite the FTSE 100 being down almost 7% over three years. This plan was the 1,001st FTSE 100 linked, capital-at-risk autocall to mature. Investec are no longer issuing new products to the market so Lowes has instead worked with Mariana Capital to continue the 8:8 range, the first issue of which has proven very popular. The second of the Mariana 8:8 Plans should be launched by the time you receive this magazine – please visit Lowes. co.uk/8 or contact your Lowes Consultant to find out more. (*Four FTSE 100 linked autocalls issued in 2008 never reached maturity because they utilised Lehman Brothers as a counterparty and failed in October 2008 when the bank collapsed. These were exceptional circumstances and over time investors recovered between 79.53% and 97.48% of original capital, depending upon the product.) Some autocalls are riskier than others and Lowes analyses every product offered to the advised UK retail market, highlighting those we will recommend to clients as part of our ‘Preferred’ plans. Lowes has continued to shake up the market with the launch of the Lowes UK Defined Strategy Fund, an innovative fund of structured investment strategies. This provides an easy way to invest across multiple structured investment strategies, linked predominantly to the FTSE 100 Index, with no more than 10% credit exposure to any one bank. introduction of the 10:10 Plans, the first 10-year plans. Extending the maximum duration and increasing the number of callable maturity dates, has meant a greater potential for the investment to mature with a gain. It is perhaps no surprise that since then the sector has seen a general move to longer durations.

Maturity Date

Term (Years)

Underlying Change

Plan Gain

Provider

Underlying

Morgan Stanley

14/01/2021 FTSE 100 6 6.47% 30% 1

Meteor

10/03/2021 FTSE 100 4 -8.41% 25%

Focus 17/03/2021 FTSE 100 4 -8.92% 25% Augere 23/03/2021 FTSE 100 3 -3.22% 19.5% Walker Crips 23/03/2021 FTSE 100 3 -3.22% 19.8% Investec 08/03/2021 FTSE 100 3 -6.72% 22.5% Investec 28/01/2021 FTSE 100 2 -3.27% 16% Investec 11/03/2021 FTSE 100 2 -5.52% 17% Hilbert 18/03/2021 3 Shares 0.5 2.12% 2 8.5% 1 Deposit based 2 Worst performing share (Vodafone)

7 2 8 9 1 6 5 3 4 1 9 6 4 5 3 7 2 8 5 3 4 2 8 7 1 9 6 6 5 2 3 7 8 4 1 9 3 4 9 1 6 2 8 5 7 8 7 1 5 9 4 3 6 2 2 8 3 6 4 5 9 7 1 4 1 5 7 2 9 6 8 3 9 6 7 8 3 1 2 4 5 Grid n°100019821 medium

Sudoku solution We hope you enjoyed the Sudoku puzzle we published on page 3 of this issue of the Lowes magazine. Here is the solution to the grid.

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