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AUTUMN BUDGET – November 2025

Thu, 27 Nov 2025 12:59:08 +0000

Interestingly most of the changes made at this budget will not take effect immediately and span over the next few tax years with forecasts from 2025/26 to 2030/31. The next general election must take place by 15^th August 2029, and as such some of these newly announced tax rises will fall after this date, bringing into question, whether or not they will even be implemented. This is a familiar budgeting tactic and one that naturally raises concerns. Reconciling this approach with the government’s recent speech is challenging. The timing suggests a deliberate effort to defer the financial impact until after voters have had their say.

Key Tax Changes and Their Implications

Rachel Reeves has stated that everyone will be asked to contribute, with the wealthiest bearing the greatest share. Please see below a summary of the main changes:

Income Tax Thresholds

These will remain frozen until April 2031, which reverses last year’s plan to increase with inflation from 2028.

Personal Allowances

From April 2027, the personal allowance must first be applied to pension, employment, or trading income, ensuring higher rates apply to other income types where possible.

Dividend Tax

From April 2026, income tax rates on dividend income will rise by 2% to:

Basic rate: 10.75% (currently 8.75%),
Higher rate: 35.75% (currently 33.75%),
Additional rate: remains at 39.35%.

Tax on Savings Income

From April 2027, income tax on interest and other savings income will increase by 2% to:

Basic rate: 22% (currently 20%),
Higher rate: 42% (currently 40%),
Additional rate: 47% (currently 45%).

Existing savings and dividend allowances, along with ISAs, will remain in place. The government estimates that 90% of UK taxpayers will not be affected, but for the remaining 10%, the impact could be significant.

Tax Changes for Landlords

From April 2027, unincorporated landlords will face separate tax rates on property income:

Basic rate: 22% (currently 20%),
Higher rate: 42% (currently 40%),
Additional rate: 47% (currently 45%).

Mortgage interest and other finance costs will be relieved at 22% (currently 20%) as a tax credit. The £1,000 property allowance and rent-a-room relief will remain. Again, the government expects that 90% of taxpayers do not have taxable property income.

Landlords have already faced significant tax changes, including restrictions on mortgage interest relief. These new measures add further pressure.

High-Value Property Surcharge (“Mansion Tax”)

From April 2028, owners of high-value properties will pay a council tax surcharge, based on 2026 property valuations. Expected annual revenue: £430 million.

The surcharge will apply to different value bands as follows:

Value	Surcharge
£2m – £2.5m	£2,500
£2.5m – £3.5m	£3,500
£3.5m – £5m	£5,000
Over £5m	£7,500

The extent of reliefs, exemptions, and support for those struggling to pay will be consulted on.

ISAs

Rachel Reeves has confirmed that from April 2027, the annual cash ISA limit will drop from £20,000 to £12,000 for savers under the age of 65. The stocks & shares allowance will remain at £20,000 for all investors.

Lifetime ISA – a consultation is planned for early 2026 to reform the Lifetime ISA. It is likely to be scrapped with a new fresh ISA aimed at first time buyers introduced.

Future Planning and Advice

Clients who rely on rental or investment income will be most affected. It is therefore important that you continue to review your overall financial position to ensure that your investments are working efficiently for you and we plan for the changes that will be implemented in the next few tax years.

Businesses (including unincorporated) and Farmers

Rachel Reeves’ latest announcements may not have delivered a single headline-grabbing change, but they include a series of measures that will significantly impact unincorporated businesses and farmers. Here are the some key points you need to be aware of:

Inheritance Tax (IHT)

From April 2026, the £1m 100% relief limit for business or agricultural property will become transferable between spouses and civil partners. This is good news for family-owned businesses and farms, but it doesn’t remove the need for careful succession planning, especially with major IHT changes coming next year.

Business Taxes and Rising Costs

Corporation tax: remains unchanged at 19% or 25%.
Income tax and NIC thresholds remain frozen until 2031, increasing tax burdens over time.
Dividend tax as mentioned above is increasing from April 2026. If you are a business owner, drawing salary & dividends, it is prudent to review your own circumstances as in some cases drawing a higher salary or paying bonuses will be more tax efficient.
Apprenticeships: Expanded funding for under-25s in SMEs.
Minimum Wage increase: From April 2026, rates rise to:
£12.71 (main rate) per hour,
£10.85 (18–20) per hour,
£8.00 (16–17/apprentices) per hour.

Salary Sacrifice Changes

From 2029, NIC-free pension salary sacrifice will be capped at £2,000 per tax year per employee. Businesses using this strategy should review their benefits planning.

Summary

As we write this on Thursday morning, the markets seem to have accepted the Budget. The budget doesn’t feel like the last tax raising at previously by this government so let us hope that the run into next year’s Budget is less damaging to business confidence & market confidence.

Please note for the purpose of being concise we haven’t included every announcement within this summary. We have picked out the points we consider most appropriate, however if you would like a full budget summary, please contact your adviser.

For clarification of any points discussed above and any future independent advice regarding your own financial planning, please do contact us on 01626 833225 or email admin@loughtons.co.uk

Have you visited our website recently? Click the link to see our recent changes and to subscribe to our regular updates www.loughtons.co.uk

Important Information

The views and opinions contained herein are those of Loughtons Independent Financial Advisers and may not necessarily represent views expressed or reflected in other economic communications, strategies or funds.

This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Loughtons Independent Financial Advisers does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Loughtons Independent Financial Advisers has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

July 2025 – Market Update and the Importance of Staying the Course

Mon, 21 Jul 2025 11:14:40 +0000

July 2025 – Market Update and the Importance of Staying the Course

Market Overview

Global markets have continued to experience mixed performance through mid-2025. While volatility remains a feature of the current environment, recent data suggests a more constructive backdrop is emerging. Inflation has cooled for the fifth consecutive month in the U.S., and central banks across major economies are cautiously shifting toward easing cycles. Equity markets have responded positively in some regions, with European indices showing resilience amid stronger fiscal spending and renewed interest in infrastructure and renewables.

In the UK, the Labour government has begun implementing its economic agenda, focusing on public investment, housing, and green energy. While markets initially reacted cautiously, investor sentiment has stabilised as the government has signalled a pragmatic approach to fiscal policy. However, the UK labour market is showing signs of strain: unemployment has risen to 4.7%, vacancies have dropped to their lowest level since early 2021, and wage growth has slowed to 5%. These trends suggest a cooling economy, and the government faces pressure to stimulate productivity and business investment.

Global Geopolitical Influence – Trump’s Return

On the global stage, Donald Trump’s return to the U.S. presidency has reintroduced a degree of unpredictability. His administration has reinstated tariffs on imports from China, Mexico, and Canada, reigniting trade tensions and raising concerns over global supply chains. However, Trump’s foreign policy has also focused on de-escalation, particularly in Ukraine and the Middle East. If successful, this could reduce geopolitical risk and free up government spending globally. Markets remain watchful, balancing the disruptive nature of his policies with the potential for longer-term stability.

The Case for Long-Term Investing

Periods of uncertainty often test investor resolve, but they also reinforce the value of long-term investing. As highlighted in recent economic outlooks, we may be entering a new productivity cycle, supported by AI, automation, and energy transition. Staying invested through these cycles allows investors to benefit from compounding returns and avoid the pitfalls of short-term market timing.

At Loughtons, we continue to build and manage portfolios using a diversified mix of actively managed funds, tailored to each client’s risk profile and financial goals. Our approach ensures exposure across asset classes and geographies, helping to mitigate risk and capture opportunities as they arise. Fund managers, who thrive in volatile conditions, are well-positioned to take advantage of market dislocations to add long-term value.

Conclusion

While headlines may continue to highlight uncertainty, the underlying market fundamentals are showing signs of improvement. By maintaining a disciplined, long-term investment strategy and focusing on your personal financial objectives, you can navigate through short-term noise and work toward a more secure financial future.

For clarification of any points discussed above and any future independent advice regarding your own financial planning, please do contact us on 01626 833225 or email advice4u@www.loughtons.co.uk

Have you visited our website recently? Click the link to see our recent changes and to subscribe to our regular updates www.loughtons.co.uk

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

March 2025 – Market update and the importance of Long-Term Investing

Tue, 04 Mar 2025 12:23:44 +0000

March 2025 – Market update and the importance of Long-Term Investing

Market Overview

Once again, global financial markets are experiencing significant volatility. The U.S. stock market has seen sharp fluctuations, with both the S&P 500 and NASDAQ indices showing small declines in the last week. This instability is largely driven by geopolitical tensions, including renewed trade conflicts and economic policy shifts, however it is important to understand that much of this volatility is driven by a small number of ‘stocks’, (which make up an even smaller portion of our clients investments) and notwithstanding the immediate uncertainty caused by the new US administration, we have seen meaningful reductions in global inflation and an increase in consumer demands over the last 6-12 months.

Impact of President Trump’s Policies

Donald Trump’s announcement of 25% tariffs on imports from Mexico and Canada and 20% on China has added to market uncertainties. These tariffs are expected to impact various sectors, including manufacturing and agriculture, potentially leading to higher consumer prices and supply chain difficulties. This of course also gives the rest of the world some opportunity to restructure their own trade deals. Additionally, Trump’s decision to pause U.S. aid to Ukraine has further complicated international relations however, whether we agree with his methods or not, it is clear that he wants ‘peace’ both in Ukraine and the Middle East and if his ‘disruptive’ approach can secure a lasting cessation of these wars, it will save governments globally billions of pounds.

The Case for Long-Term Investing

In times of market turbulence, it’s crucial to remember the benefits of long-term investing and to remind yourself why you have money invested.

Warren Buffett said, “The only value of stock forecasters is to make fortune-tellers look good. The short-term direction of stock prices is close to random. But why? It all comes down to human psychology and the relationship between markets and volatility. Time in the market beats market timing every time”.

As advisers, Loughtons build and maintain portfolio’s for our clients from a range of primarily active (rather than passive) funds. We choose funds based on our clients ‘capacity for investment’ and attitude to risk’ and ensure a spread of investments both in terms of ‘equities, cash, fixed interest etc. but also geographically. We know that not all areas increase or decrease together, so diversification in itself reduces the risk posed by one individual area or asset class. We pick the fund managers to fill the portfolio’s based on the spread of assets as agreed and as appropriate, and we leave the fund managers to pick and choose the underlying investments. Their aim is to deliver performance that beats the fund’s stated benchmark or index and whilst ‘we’ as investors fear volatility, fund managers thrive on it, as it gives them opportunities to buy and sell and add value and increase the value of their funds.

Conclusion

Whilst current market conditions may seem daunting, it’s important to maintain a long-term perspective. By staying invested and focusing on your financial goals, you can navigate through volatility and work towards building a secure financial future.

Have you visited our website recently? Click the link to see our recent changes and to subscribe to our regular updates www.loughtons.co.uk

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Staff News

Wed, 29 Jan 2025 14:43:14 +0000

In recent news,

Our own Lucy Loughton travelled to Sydney, Australia to compete in the B14 Sailing World Championships over the Christmas Holidays, with her partner Chris Bateman. Representing Ireland, they become the first ever mixed crew and the first ever non GBR or AUS boat to win this prestigious title.

With tight competition and a lot at stake, they powered through to take the win in what turned out to be a blustery championships, winning six out of nine races on Sydney harbour. GBR team sailors and multiple world title winners Nick Craig and his crew Toby Lewis finished second. The pair went in as favourites, only to be beaten by the wild card team of Bateman and Loughton.

In good measure, Lucy also became the first ever female crew to stand on the top step of the podium of the World Championships.

Their campaign now continues, having completed the first big event of the sailing season.

Have you visited our website recently? Click the link to see our recent changes and to subscribe to our regular updates www.loughtons.co.uk

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

AUTUMN BUDGET – October 2024

Fri, 01 Nov 2024 12:27:16 +0000

AUTUMN BUDGET – October 2024

On Wednesday 30^th October 2024, The Chancellor Rachel Reeves delivered the much-anticipated 2024 Budget, marking Labour’s first budget in 14 years and the first ever by a female Chancellor. Here are the main and relevant points with regards to financial planning:

Capital Gains Tax

Capital Gains Tax (CGT) has been increased with immediate effect to 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers (increasing from 10% and 18% respectively). CGT on residential property remains unchanged which was already at a higher rate.  This really emphasises the tax benefits of both Pensions and ISAs.

Inheritance Tax

The basic current Inheritance Tax (IHT) thresholds have continued to be frozen and also extended from 2028 until 2030, with the first £325,000 remaining tax-free. (£500k if it includes a residence left to a direct descendant) this will result in more estates being included in IHT

Pensions

After a lot of speculation there have been two changes to pensions;

Firstly, in April 2027 we will see the end of the Inheritance Tax exemption for unused pension values assuming it passes consultation. This may prompt some rethinking of our retirees’ who are in the decumulation stage, as it is not so obvious to draw down on ISA savings before pensions. Your adviser will discuss this with you at your next review.

The second pension change takes effect immediately and pertains only to the transfer of pension funds to the EEA for individuals who remain UK residents. This change makes such transfers significantly less advantageous, aligning them with transfers to other regions around the world.

State Pensions

It was confirmed that the Triple Lock on State Pensions would be maintained for the remainder of this parliament, which means a 4.1% earnings-based increase for April 2025. The full New State Pension will increase to £230.25 a week from 6 April 2025.

The 4.1% increase will also apply to the guaranteed element of Pension Credit.

Stamp Duty Land Tax

The Stamp Duty Land Tax has been increased for second homes from 3% to 5% with effect from 31 October 2024.

Income Tax and National Insurance

Labour’s manifesto promised that “working people” would not face higher income tax or National Insurance (NI). However, they have confirmed that the current freeze on thresholds will remain in place until April 2028. As a result, more individuals will continue to be drawn into paying higher taxes during this period.

The Government did, however, aim its biggest tax increase at employers, increasing employer NI contributions from 13.8% to 15%.  This, alongside a drop in the threshold at which employers start to pay NI from £9,100 to £5,000 is expected to raise £25bn.

Business owners should consider opting for dividends instead of a salary and explore the best ways to withdraw funds from their business. The potential for savings by employing a spouse or partner has decreased significantly due to a sharp reduction in the secondary threshold. It’s important to review current arrangements in light of this change. As always, seeking professional advice is crucial.

Non-Dom status

The Government’s decisions to abolish the ‘Non-Dom’ status and end excluded property trusts in this year’s Budget could have an impact on the number of UK high-net-worth individuals settling long term in the UK, which could have a knock-on impact on the UK’s high end property market. The provisions are relatively complex and specialist advice in relation to those affected will be essential.

ISAs

There are no changes to the current subscription limits. These are £20,000 for ISAs, £4,000 for Lifetime ISAs (included in the £20,000 ISA subscription limit), £9,000 for Junior ISAs and the Child Trust Fund. These will be fixed until 5 April 2030.

The ‘British ISA’ proposed in the last budget will not go ahead.

Pre-budget rumours of a cap an accumulated ISA savings have not materialised either.

Summary

Overall, this has been a significant tax raising Budget with lasting implications. It hasn’t been easy for those looking to save and invest for their future. In light of the changes announced, many individuals will understandably seek to grasp how this affects them and how it may alter their personal financial plans.

Please note for the purpose of being concise we haven’t included every announcement within this summary, there have been changes ranging from an increase in the National Living wage to the addition of VAT on private schools fees. We have picked out the points we consider most appropriate, however if you would like a full budget summary, please contact your adviser.

Have you visited our website recently? Click the link to see our recent changes and to subscribe to our regular updates www.loughtons.co.uk

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Inflation Forecast – November 2023

Tue, 12 Dec 2023 13:00:30 +0000

INFLATION 15^TH NOVEMBER 2023

Inflation fell to 4.6% as at end of October from 6.7% at end of September, this as a result of lower food and energy costs. This is the lowest rate of inflation for two years and core inflation, which does not include more volatile prices such as food and energy, fell to 5.7 per cent.

It means Rishi Sunak has hit his target of halving inflation after making the pledge in January, a time when it was running at over 10 per cent, despite this fall however, interest rates are still expected to stay at the current level into the new year, and we then expect to see rates starting to reduce.

Interestingly, this news comes on the back of US inflation falling to 3.2 per cent in October.

Why has inflation gone down?

Energy

The Bank of England said this month in its monetary policy report that the “main driver of the expected fall…. is a reduction in the Ofgem energy price cap, reflecting the decline in wholesale gas prices over the course of 2023.”

As a result of the change in the Ofgem price cap, the cost of gas fell by 31% for the year to October, compared to the rise seen in September. Electricity costs also fell 15.6%

However, the price of gas remains around 60% higher than it did in October 2021, with electricity about 40% higher, according to the ONS.

And despite the fall in energy costs, most households will likely be spending more on their bills as a result of less Government help. The Energy Price Guarantee has been removed alongside the additional £66 per month that was taken off households bills over last winter.

Food

The rate of inflation for food and drink slowed but still remains higher at 10.1%. This is down from 12.2% in September and from the high of 19.2% in March.

This means that while prices for food are still going up, they are generally rising at a slower level.

The British Retail Consortium, the trade association for supermarkets and other retailers, said back in July that figures suggested food inflation had peaked, so it is unsurprising that the figure is continuing to fall and it is expected that it may be close to zero by the end of 2024.

However, this would only be the case should there be no further major problems beyond the conflicts in Gaza and Ukraine.

What does this mean for Rishi Sunak’s pledge?

The Prime Minister pledged to halve the rate of price increases when the figure stood at 10.1%. He has now achieved this although some economists say he can take little of the credit for the figure falling because the Bank already predicted this and it controls interest rates, which is the main tool for decreasing inflation.

What will happen to inflation going forwards?

It is expected that inflation will continue to fall although it is likely to slow in pace and could take some time before the Bank hits its 2% target. It said it expects it to reach these levels by the end of 2025.

Wages could impact this. They have continued to grow at one of the fastest paces on record in the three months to September, suggesting it will take even longer for the Bank to return to its inflation target of 2%.

Regular pay excluding bonuses was up 7.7% year-on-year in the three months to the end of September. This is down from a 7.9% increase last month but is still one of the biggest increases on record.

What does this mean for interest rates?

It is unlikely to make any difference to the current interest rate predictions.

Economists say the base rate will stay the same – at 5.25% – into the new year before hopefully falling in the latter half of 2024.

However, what happens will depend on geopolitical factors such as the Israel-Hamas war and the ongoing conflict in Ukraine.

What does this mean for mortgages, savings and pensions?

Mortgages

Mortgages are not directly affected by inflation, although many products are affected by the Bank of England’s base rate, which inflation influences.

However, currently lenders are dropping rates to increase competition in the market as less people are taking out loans amidst the current economic climate.

There are now rates of below 5%, although several come with high fees attached, and brokers are expecting rates to come down further in the coming months.

Savings

Meanwhile, high inflation is bad news for savers as it erodes the value of money held in the bank. Therefore, the lower the rate, the better the news.

However, experts believe we are “past the peak” for savings with most fixed now dropping below 6%. This means it is worth taking advantage of the best deals now.

Pensions

The drop in inflation will be welcomed by pensioners who have been struggling in the face of the cost of living crisis over the past two years, especially those for whom the state pension makes up a large portion of their income.

They are in line for a potential 8.5% boost to their state pension next year under the triple lock mechanism though this figure is thought to have been swollen by the impact of bonuses made to NHS and civil service workers throughout the year.

Annuity rates remain close to the highs experienced in the aftermath of last year’s mini Budget so continue to deliver the best value we’ve seen in years. For instance, a 65 year old with a £100,000 pension can currently get up to £7,310 per year from a standard level single life annuity.

If interest rates are held in the face of falling inflation, then this settled period should continue and this can encourage those who had been considering purchasing an annuity but holding back for fear of missing out on a higher price the impetus to take the plunge.

Have you visited our website recently? Click the link to see our recent changes and to subscribe to our regular updates www.loughtons.co.uk

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Economic & Market Outlook – August 2023

Fri, 11 Aug 2023 15:08:06 +0000

Economic & Market Outlook – August 2023

The second quarter of 2023 has been a bit of a rollercoaster ride for the financial markets. There has been good news, bad news, and some surprises along the way. Let’s take a look at what happened and what we can expect for the rest of the year.

The good news: The economy is recovering

The global economy has continued to recover from the Covid-19 pandemic, as more people got vaccinated and more businesses reopened. The US, China, and Europe were the main drivers of growth, as they showed strong signs of improvement in their output and employment. The International Monetary Fund (IMF) raised its forecast for global growth in 2023 from 5.5% to 6%, saying that “the outlook presents daunting challenges related to divergences in the speed of recovery both across and within countries and the potential for persistent economic damage from the crisis.”

The financial markets cheered the economic recovery, as it boosted the confidence and earnings of consumers and businesses. Global equities gained 2.6% in Q2, with the US being the best performer among major markets.

The bad news: Inflation is rising

The flip side of the economic recovery was the rise in inflation as supply chains bottlenecked and pent-up demand pushed up prices of goods and services. The global consumer price index (CPI) rose 3.8% year-on-year in May 2023, up from 2.4% in February 2023. The US CPI rose 5% year-on-year in May 2023, the highest since August 2008. The core CPI, which excludes food and energy prices, rose 3.8% year-on-year in May 2023, the highest since June 1992.

The financial markets have been spooked by the inflation surge, as it raised the fear that central banks would have to raise interest rates sooner and faster than expected to keep inflation under control. Global bond yields rose sharply in Q2, especially in the US, where the yield on the benchmark 10-year Treasury note rose from 1.74% at the end of March 2023 to 1.95% at the end of June 2023. This resulted in a negative return of -1.9% for US Treasuries in Q2. Global bonds also posted a negative return of -1.4% in US dollar terms in Q2.

The surprises: Central banks are hawkish

The biggest surprise of Q2 was the change in tone from some major central banks, which signalled a more aggressive stance on monetary policy than expected. The US Federal Reserve (Fed) surprised the markets by announcing that it would start tapering its bond-buying programme later this year, and that it expects to raise interest rates twice by the end of 2023. This was a big shift from its previous projection of no rate hikes until at least 2024. The Fed also raised its inflation forecast for 2023 from 1.8% to 3.4%, but said that it still believes that inflation is transitory and will fall back to its 2% target over time.

The Bank of England (BoE) also surprised the markets by saying that it might have to raise interest rates sooner than expected if inflation continues to rise above its 2% target. The BoE said that inflation could fall to 3% by the end of this year, before finally returning back to its target over time. The BoE also reduced its bond-buying programme by £50 billion, but said that this was not a signal of tightening monetary policy.

The European Central Bank (ECB) was less hawkish than the Fed and the BoE, but still hinted at some tapering of its bond-buying programme later this year if the economic outlook improves. The ECB said that it would maintain its current pace of bond purchases until at least September 2023, but that it would reassess its policy stance in the coming months based on the inflation and growth data. The ECB also raised its inflation forecast for 2023 from 1.4% to 1.9%, but said that it still expects inflation to remain below its 2% target over the medium term.

What’s next: Cautious optimism

So, what can we expect for the rest of 2023? The global economy is likely to keep growing, but at a slower pace and with more uncertainty. The vaccination programme should help more countries to reopen their economies and resume normal activities. But the emergence of new variants of the virus could pose a risk to the public health situation and the policy response. Inflation could cool down in the medium term, as these temporary factors fade and as central banks tighten their monetary policies gradually and carefully.

We consider that the financial markets will likely remain volatile and vary across asset classes, regions, and sectors. We think that equities could still do better than bonds, as they benefit from improving corporate earnings and valuations. But equities could also face some challenges from higher bond yields, tighter monetary policies, and geopolitical tensions. We consider that a balanced approach to equity investing is a good idea, with a focus on quality companies that can grow and make money in different market conditions.

Bonds could face a tough environment in the second half of 2023, as inflation expectations stay high and central banks signal a more hawkish stance on monetary policy. We consider bond yields will rise further in the US and other developed markets, which will hurt bond prices.

To summarise, investors should keep a long-term view and a disciplined approach to investing in the second half of 2023. We will therefore continue to work with you to assess your objectives and ensure you have a well-balanced portfolio that matches your attitude to risk and capacity for loss. We will consider what impact the current stage in the economic cycle has on your exposure to various assets. Remember, volatility can be partially mitigated by diversifying investments suitably across a broad range of asset classes.

Have you visited our website recently? Click the link to see our recent changes and to subscribe to our regular updates www.loughtons.co.uk

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

CONGRATULATIONS

Wed, 28 Jun 2023 11:52:29 +0000

CONGRATULATIONS

Congratulations to Max Taylor on passing his Diploma in Regulated Financial Planning exams!

The Diploma in Regulated Financial Planning is a level 4 qualification recognized by the Financial Conduct Authority (FCA) and is the qualification of choice for our profession. It develops technical knowledge and financial planning capabilities across six core areas.

This is the first stage in becoming a Financial Adviser and we are proud of Max’s achievements. Max commented ‘’I’m absolutely delighted to complete this part of my training and am now looking ahead to the next stage of my career”.

Max’s next step will be to work towards ‘Competent Adviser Status’ which all newly qualified advisers have to achieve, and we are excited and looking forward to Max joining our advising team and helping our clients secure their financial future.

Have you visited our website recently? Click the link to see our recent changes and to subscribe to our regular updates www.loughtons.co.uk

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Economic & Market Outlook – May 2023

Mon, 22 May 2023 09:44:56 +0000

Economic & Market Outlook – May 2023

The year 2023 is expected to be a challenging one for the global economy and financial markets, as the world faces multiple headwinds such as inflation, monetary policy tightening, geopolitical tensions and the ongoing impact of the COVID-19 pandemic. However, there are also some signs of hope and resilience, especially as we near the second half of the year, inflation is predicted to ease, central banks hopefully pause their rate hikes and China reopens its economy after lifting its strict COVID-19 restrictions. I have summarised a brief overview of the key economic factors and market trends for the UK, US and China in 2023.

The UK economy is forecast to grow by 1.4% in 2023, down from 2.6% in 2022, according to the IMF. The main drivers of growth are expected to be consumer spending, which is supported by high savings and rising wages, and business investment, which is boosted by strong external demand and improved confidence.

However, the UK also faces several challenges, such as supply chain disruptions, labour shortages, higher energy costs and rising interest rates.

The Bank of England (BoE) has now raised its base rate 12 consecutive times to its current level of 4.5% which is an increase of 1% since the end of 2022. It is possible we haven’t seen the end of this yet with inflation still above 10%.

The UK stock market is likely to be volatile in 2023, as investors weigh the risks and opportunities of the post-Brexit environment.

The US economy is forecast to grow by 1% in 2023, down from 5.5% in 2022, according to the IMF. The US economy has faced a slowdown in the first half of 2023, as the effects of fiscal stimulus fade, inflation remains high (although much lower than the UK) and monetary policy continues to tighten.

The Federal Reserve (Fed) has raised its federal funds rate by 1.25% since the end of 2022. With inflation easing to a more respectable level, could this have been the last hike?

If this were the case we would expect to see the US economy rebound in the second half of 2023, as inflation continues to ease, consumer confidence improves and central banks signal a pause in their rate hikes. However, a potential recession could slow matters.

China

The Chinese economy is forecast to grow by 4% in 2023, up from 2.8% in 2022, according to the IMF. It is expected to benefit from the reopening of its domestic and international markets after Beijing lifted its strict COVID-19 restrictions in January 2023.

The government is likely to provide more fiscal and monetary stimulus to support growth and stability amid external uncertainties and domestic challenges such as debt risks and environmental issues.

The Chinese stock market is expected to perform well in 2023, as investors regain confidence in China’s growth prospects and policy support. The Shanghai Composite index is projected to end 2023 about 20% higher than its current level. It is worth noting though, their economy has not had a recovery since Covid-19 which we saw within developed markets.

Conclusion

The year 2023 will be a difficult one for the global economy and financial markets, but not without some silver linings. Investors should be prepared for volatility and uncertainty in the first half of the year, but also look for opportunities and recovery in the second half of the year. The UK, US and China will face different challenges and opportunities in their economic and market outlooks for 2023.

We will therefore continue to work with you to assess your objectives and ensure you have a well-balanced portfolio that matches your attitude to risk and capacity for loss. We will consider what impact the current stage in the economic cycle has on your exposure to various assets. Remember, volatility can be partially mitigated by diversifying investments suitably across a broad range of asset classes.

Have you visited our website recently? Click the link to see our recent changes and to subscribe to our regular updates www.loughtons.co.uk

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Spring Budget – March 2023

Thu, 16 Mar 2023 12:28:30 +0000

SPRING BUDGET – March 2023

Following the recent 2023 Spring Budget, please see below a summary of the main financial points:

Pensions

The Lifetime allowance for pensions is being abolished from April 2024. The current lifetime allowance of £1,073,100 will remain until this date.
However, the tax-free cash entitlement will remain at 25% of the current lifetime allowance; total of £268,275.
The annual contribution allowance will increase to £60,000 from the start of the new tax year.
The money purchase annual allowance will increase to £10,000 from the new tax year.
Finally, the tapered annual allowance threshold is increasing to £260,000.
Jeremy Hunt was keen to implement these changes to encourage doctors to continue to work beyond age of 50, however he realised that this issue was reoccurring over multiple industries and therefore concluded that everyone should benefit.
Your adviser will be able to discuss the impact this has on your own personal finances at your review meeting, however if you wish to discuss beforehand please do not hesitate to contact them directly.

Investments

The ISA subscription limit remains at £20,000 in 2023/24.
The Junior ISA and Child Trust Fund subscription limits remain at £9,000 in 2023/24.
Please refer to our previous blog, Autumn Statement dated 1^st December 2022 for more details surrounding various tax changes which will be implemented from the start of the new tax year.

Child Care

Free childcare in England for working parents is to be extended to children aged 9 months to 3 years old and therefore free childcare will now be available for up to 5-year-olds. This will be implemented in stages by September 2025 and you will have up to 30 hours available per week.

If you wish to discuss any of the above with relation to your own finances and financial plan, please feel to call us on 01626 833225 or email us to find out more.

Have you visited our website recently? Click the link to see our recent changes and to subscribe to our regular updates www.loughtons.co.uk

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Economic & Market Outlook – February 2023

Fri, 03 Feb 2023 09:59:30 +0000

Economic & Market Outlook – February 2023

I think many of us will agree, the best thing to say about 2022 is that it’s now over. We experienced a fall of over 20% in global stocks and government and corporate bonds followed suit, and many are saying that it was a ‘perfect’ storm. Not what I think of as ‘perfect’ personally, the principle drivers being inflation and rising interest rates, definitely not ideal and various other economic factors have contributed to this including the war in Ukraine, China’s zero policy to Covid-19 and UK government issues.

As we look into 2023, we find ourselves at an interesting point of disconnect between the economy and the stock market. The two are often different with markets trying to look through the grim headlines to better times ahead, and we know that they tend to anticipate changes in the economy up to as much as 6 months prior to the any actual pivot.

The rise in interest rates last year has made bonds a viable income alternative for the first time in many years and when central banks turn their attention to supporting the economy rather than fighting inflation, rates will revert to a more neutral level, giving fixed income investments a further boost. Thus, there is a plausible case to be made for both equities and fixed interest asset classes to rise this year. Shares could benefit as we look through recession to the recovery beyond and bonds could bounce as the inverse relationship between yield and price becomes favourable again.

With this in mind, in 2023 we would like to see an earlier indicator from the Fed and other central banks; an unexpected improvement in the Ukraine situation; better news on Covid in China. All of these would have a significantly positive impact on depressed market sentiment.

Bonds to make a comeback? With interest rates set to decline, conditions bode well for stable and attractive bonds, as prices move in the opposite direction of yields. This would lead to a rise in the underlying capital value of fixed interest stocks.

US Equities, are likely to have continued volatility and earnings estimates are considered a little high at present. In addition, the US dollar is predicted to fall in value which in the short term will effect markets but looking further ahead this will improve the US’ ability to trade globally on a more even playing field.

UK and European Equities could offer a modest upside, with a forecasted 6.3% total return over 2023 as lower inflation nudges stock valuations higher. In addition the current price to earnings ratio is looking appealing with the UK sitting at approx. 10 x earnings and Europe at 12 x earnings compared to the US which is approx. 18 x earnings. These are often a good indicator of potential growth.

Emerging Markets and Japan, this has been a major bear market for the last couple of years, but is the tide now turning? Valuations are cheap, and cyclical winds are shifting in favour of emerging markets especially if global inflation eases more quickly than expected, the Fed stops hiking rates and the U.S. dollar declines.

Summary

It is reasonable to surmise that the beginning of 2023 will continue to provide challenging times ahead, however, if we do start to see inflation coming down slightly and China’s economy opens up properly again for the first time since Covid, then the outlook will certainly be more optimistic and would provide markets with the boost we are all keen to see.

We will therefore continue to work with you to assess your objectives and ensure you have a well-balanced portfolio that matches your attitude for risk and capacity for loss. We will consider what the impact the current stage in the economic cycle has on your exposure to various assets. Remember, volatility can be partially mitigated by diversifying investments suitably across a broad range of asset classes.

Have you visited our website recently? Click the link to see our recent changes and to subscribe to our regular updates www.loughtons.co.uk

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Autumn Statement – November 2022

Thu, 01 Dec 2022 12:00:42 +0000

Autumn Statement – November 2022

In November 2022, the UK’s fourth Chancellor in the last three months has delivered the UK’s latest Autumn Statement and whilst it should provide a boost for the Treasury; and the initial reaction from the markets has been positive, the cost, which is huge is being funded primarily by the taxpayer.

The headlines were inevitably the spending commitments, however, as is often the case, the devil is in the detail, and there is a lot of detail. Changes to Capital Gains Tax (CGT), the Dividend Allowance and Inheritance Tax (IHT) are hugely significant for those with accumulated wealth, and will see the ‘taxman’ take a growing share of private wealth to help plug the gap in the nation’s finances. This ultimately means that our clients will potentially be liable to more tax to be paid on investments, but it also means it is more important than ever to review your arrangements, to ensure that you navigate the UK’s ever more complicated tax system.

Many people with capital they want to preserve for the benefit of themselves and their family will now need extra support to understand how today’s changes impact their personal financial situation. The upcoming changes to the Dividend Allowance and the Capital Gains Tax Annual Exempt Amount, as well as Income Tax on the highest earners will all have a significant impact. The government’s estimates published today suggest the CGT reforms alone will raise around £440 million a year by 2027/28, highlighting the massive scale of this tax raid on client wealth.

Here are some of the key announcements made today by the Chancellor Jeremy Hunt:

Dividends

The tax-free allowance on dividends will be cut to £1,000 from next year and £500 from April 2024. It means someone with a portfolio of £20,000 that yields 5% a year will hit the lower tax-free allowance of £1,000 from April next year, while someone with a portfolio of £10,000 that yields 5% a year will hit the tax-free allowance of £500 from 2024.

For those with unused ISA allowance this creates an added incentive to shelter their investments, or utilise their pension if they can afford to tuck their money away for longer. Some company directors may also reassess whether there is a tax benefit to running their own business, which doesn’t exactly play into the Government’s drive to boost GDP and create more home-grown businesses.

Slashing the Dividend Tax Allowance but keeping the Personal Savings Allowance untouched also creates an uneven playing field where you can earn more tax-free in savings income each year than you can in dividend income.

Capital Gains

The tax-free allowance for Capital Gains Tax had already been frozen until 2026, but the Chancellor has now opted to cut the allowance.

It will see the current £12,300 allowance cut by more than half to £6,000 from next April, and then again to £3,000 in April 2024. The move will mean that investors will pay an extra £25 million in tax from next year and another £275 million the year after.

A basic-rate taxpayer with gains over the current tax-free limit will face an additional cost of £630 from next year, while an additional rate payer will be paying £1,260 more in tax. This ratchets up to an extra £930 for a basic-rate taxpayer the year after, or £1,860 for a higher-rate payer, when compared to the current system.

Those selling a house or flat that isn’t their main residence will face an even bigger hit courtesy of the 18% and 28% rates on property for basic and higher rate taxpayers.

Anyone who hasn’t used their current Capital Gains Tax allowance could consider cashing in gains before the tax-year end in April, while those with ISA allowance remaining might utilise a ‘bed-and-ISA’ transaction to sell investments up to the maximum gain of £12,300 and rebuy them within their ISA.

Inheritance Tax

The freeze on the IHT nil rate band will now be extended from 2026 to 2028 and will mean that the £325,000 tax-free allowance will be unchanged for almost two decades.

Although just 1 in 25 deaths led to Inheritance Tax being paid last year, it is still one of the UK’s most hated taxes and freezing the threshold will now see more people dragged into its net.The move today by the Chancellor will increase the importance of estate planning for those seeking to mitigate the impact of IHT.

Income Tax – additional rate threshold

Incredibly, just two months ago the highest earners were celebrating the abolishment of the additional rate of tax. A complete about-turn now sees the additional rate threshold cut from £150,000 to £125,140. The move will cost someone on £150,000 almost £1,250 a year extra in tax – putting an extra 2% on their total tax bill.

It also comes at a time when wages are rising considerably, creating a pincer movement that will see more people captured in the additional rate tax net.

As a result the government will raise an extra £420 million in tax from higher-paid workers next year, rising to £790 million the year after.

The latest Government figures show there is already expected to be a 50% increase in the number of additional rate taxpayers this year, even before this change was made.

Income Tax – frozen allowances

The Income Tax personal allowance and higher rate threshold will remain at their current levels until 2027/28. The measure will see ‘fiscal drag’ boost Income Tax revenues substantially.

Those with earnings just under the current higher-rate threshold are likely to be hit the hardest. Our estimates indicate someone with earnings of £50,000 today will pay £6,570 more in Income Tax over the entire period of the tax freeze from 2022/23 to 2027/28. Someone on the average UK salary of £33,000 will pay almost £2,600 more Income Tax thanks to the freeze.

State pension triple-lock

The Chancellor confirmed the triple-lock, abandoned for 2022/23, will be reinstated next year.

This means the state pension and pension credit will increase by 10.1%, in line with the CPI inflation measure for September 2022. The decision to raise working age benefits in line with inflation also ensures the Government avoids any accusations of favouring one generation over another.

As a result, the full flat-rate state pension, paid to those reaching state pension age from 6 April 2016, will increase from £185.15 per week to £203.85 per week (£10,600.20 per year) from April 2023. This is something of a milestone as it will be the first time the UK state pension has breached the £10,000 per year mark.

The basic state pension, paid to those who reached state pension age before 6 April 2016, will increase from £141.85 per week to £156.20 per week (£8,122.40 per year).

Although welcomed by millions of retirees, the increase is still below the latest CPI inflation readout of 11.1%. If those price rises persist, even the triple-lock won’t fully protect pensioners’ living standards, highlighting the critical importance of having private wealth from which to generate retirement income alongside the state pension.

Although there were no other major announcements concerning the pension system, the Chancellor did confirm that a review of the state pension age will be filed early next year.

Have you visited our website recently? Click the link to see our recent changes and to subscribe to our regular updates www.loughtons.co.uk

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Cybersecurity

Tue, 25 Oct 2022 11:17:51 +0000

Cybersecurity

Cybersecurity is the protection of internet-connected systems such as hardware, software and data from cyberthreats. The practice is used by individuals and companies to protect against unauthorized access to data centres and other computerised systems.

October is cybersecurity awareness month and with this in mind along with the increased use of technology we thought it would be useful to inform you of some precautions that you should all take.

Choose secure passwords/passphrases

A secure password helps keep you safe online. The key to your password being secure is its strength and memorability. If you are concerned about the security for any of your online accounts, please update your passwords immediately.

Never use your PIN, name in any form (first, middle, last, maiden or nickname) and / or date of birth as your password.
Putting together a few words or phrases makes a longer password that can be easier to remember.
Use a combination of letters, numbers and special characters (at least 10 in total). Using less common special characters will help strengthen your password.
Change your password regularly. There’s no set rule on this, but the more frequent the better.
Always use different passwords on key accounts that hold financial or personal information. This way, even if one password is compromised, your other accounts will remain protected.
Set up multi-factor authentication for your email accounts / WhatsApp.
Never access your password information if you are using an unsecured, public WI-FI connection.

Protect your computer

Many of us see these vital tasks as being a bit of a pain but they’re essential to keeping us safe online. Here’s how:

Keep your devices updated with the latest security patches and system software to guard against evolving threats. You can find out more from Microsoft† and Apple†.
Keep your antivirus software updated to reduce the risk of malicious software and viruses being installed on your computer.
Your home router is your online front door allowing your devices to connect to the internet, so it’s really important that you ensure it remains secure. One of the keyways to protect your router is to always change the default admin password as the one set by the manufacturer can easily be discovered by attackers.
Never leave your device unattended and logged-in.

These are some basic essentials to ensure you remain safe however, there are various other steps you should keep in mind:

1) Be on the lookout for suspicious emails

When you are in a rush this potentially increases your vulnerability due to the fact that normal precautions may not be taken. Criminals are aware of this and they craft attacks designed to take advantage of this. This can often appear as an email where the criminal try to obtain personal information or compromise the technology; this is known as a phishing. There are six potential ways to help spots this:

The message has a suspicious or mismatched URL or a strange email address
The message has poor spelling or grammar
The message asks for personal information
You’re not expecting anything from the sender
The message states you must act now
Something seems wrong

If you think you have identified one of these emails, you should bin it and delete it permanently.

2) Beware of email hacking

Unfortunately, email is a favoured channel for cybercriminals and email hacking (the taking over of someone’s account without their knowledge) is becoming much more prevalent and is now a common feature of financial fraud.

You may think you have just received an email from a trusted source but you could have received a message from a criminal who has taken control of their email account.

It is particularly important you double check with the sender before transferring any money which has been requested by email or for that matter any personal information. Don’t check by replying to the email you’ve received as you may be communicating with the fraudster; always call and speak to the individual or organisation personally to make sure the request is genuine.

3) Protect your accounts

As mentioned above it is essential to have a strong password / passphrases.

This is especially important for your email account as it contains so much personal information and can be used as the gateway to many of your other online accounts. No matter how strong your passphrase is, there is always a chance it could be hacked or stolen through no fault of your own.

Therefore, adding multi-factor authentication provides an extra layer of protection by having a site or service verify your identity using two different elements. By using something you know, like a passphrase, and something that only you have, such as a one-time code or fingerprint, you can help secure your email account and other important services.

4) Limit what you store

If your email account becomes your document store, then, if compromised, a hacker could gain access to all of the information you are stockpiling. Every attachment you ever sent or received, every conversation, every photo, contracts, invoices, tax forms, reset passwords for every other account – sometimes even passwords or credit card PINs!

To minimise risk, only save limited information within your email account. Save any sensitive personal information outside of the mailbox in secure document repositories.

5) Wi-fi access is not always secure

It’s easy to stay connected with public wi-fi access points everywhere; restaurants, coffee shops and shopping centres but accessibility can come with risk. Public wi-fi ‘hotspots’ are exactly that they offer no privacy or protection to your data and communications. Never use public wi-fi to access sensitive information, like your email account, or enter log-in details or credit card information while connected to it.

6) Protect your data with regular backups

Ransomware is becoming increasingly common. This malicious software (which can be downloaded by opening attachments in emails or through following instructions on a fraudulent web site) encrypts your data, preventing you from accessing it. The criminals will then make contact demanding a payment (ransom) to restore your access. Please do be aware, reports show there is no guarantee your data will actually be restored, even if you pay in full.

One of the best ways to protect yourself from ransomware is to make regular back-ups of your most important files. Many devices have ‘auto-backup’ options so make sure these are turned on. Backups can be made to a cloud backup service, a different device or to removeable media such as a USB stick (make sure you know how to restore the files from any backup should you need to do so). Ensure back up devices aren’t permanently attached to your computer or they could fall prey to ransomware attacks too.

7) Keep your guard up when you’re out and about

If you regularly take your mobile device, tablet, smart phone, or laptop with you when you go out, you need to take digital security just as seriously on the move as you do at home. As well as being easier to lose (or just leave behind), you are taking your device out of the controlled environment of your protected home and personal wi-fi into the big, bad world.

One of the simplest and most effective things you can do to protect your data is to take a minute to look through your device’s security settings. Using a screen lock, which requires a pass code to deactivate, is vital if you ever become separated from your mobile technology.

Turning Bluetooth off when you aren’t using it helps prevents hackers from stealing your data.

Android, Apple’s iOS and Windows operating systems all include remote find, lock and wipe features as standard. Make sure you enable and familiarise yourself with these features so you are ready to use them if your device goes missing.

8) Be careful how you use social media

Social media can be a hugely fun and powerful way to keep in touch with old friends (and make new ones), share interests and keep up to date with the latest trends. Unfortunately, sites like Facebook, Twitter, YouTube, Pinterest and LinkedIn are just as popular with criminals.

Be wary of putting up any information that could be used to break into your online accounts. Don’t share your home address, email address, phone number and date of birth. Also, try not to let the world know exactly where you are every minute of the day. Telling everyone when you are out and about or away on holiday will also let them know when you’re not home.

9) Knowledge is the best defence

When it comes to your online financial safely, knowledge is one of the best tools you have. Understanding the latest security advice and guidance means you can stay one step ahead of cybercriminals and will help you counter the emerging scams and threats.

Have you visited our website recently? Click the link to see our recent changes and to subscribe to our regular updates www.loughtons.co.uk

Important Information

Information contained in this document has been obtained by Loughtons Independent Financial Advisers from public sources. Care has been taken in collecting the data of its accuracy when published, however the content of this document could become inaccurate due to factors outside our control and should, therefore, be used as a guide only.

This document is published and distributed on the basis that Loughtons Independent Financial Advisers is not responsible for the results of any actions taken on the basis of information contained in it nor for any error in or omission from it. Loughtons Independent Financial Advisers expressly disclaims all and any liability and responsibility to any person in respect of claims, losses or damage, either direct or consequential, arising out of or in relation to the use and reliance upon any information contained in this document.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Market Update – September 2022

Tue, 20 Sep 2022 08:03:59 +0000

Market Update – September 2022

The last six months have been a challenging time for Global economies and investment fund managers alike. Although Central banks have committed to bring inflation under control, this combined with the inherent risks to the growth outlook has continued to unnerve equity and bond markets.

The uncertainty about the outlook for the global economy remains elevated and this uncertainty is especially raised in Europe. After six months of war in Ukraine there is no sign of a ceasefire, and a recession seems increasingly likely this winter as the region’s energy crisis continues to intensify. While the resumption of Ukraine’s grain exports through the port of Odessa has eased global food price pressures somewhat, Russia has continued at the same time to limit its gas exports to Europe, which together with the announcement of an unscheduled maintenance shutdown of the Nord Stream 1 pipeline, pushed average gas prices over the month to new all-time highs.

Europe

Eurozone second-quarter showed GDP growth of 0.7%, but the data revealed important divergences among member states. Those countries benefiting from the post-Covid services rebound, such as Spain, Italy and, to a lesser extent, France, generally performed well while the German economy, which is the most dependent on Russian gas imports, came to a standstill. The relative resilience of the eurozone economy in the first half of the year is also due to the fiscal measures deployed in the European Union (EU) since the start of the war in Ukraine.

However, the second half of the year looks more challenging again. Even though EU natural gas inventories reported in August were in line with the 10-year average, thanks to more liquefied natural gas imports and the reactivation of coal-fired power stations, the substantial reduction in gas flows through the Nord Stream 1 pipeline has pushed European energy prices to new heights. In this context, German producer prices increased by 37.2% in July, their biggest increase on record, and the situation could further deteriorate on the back of logistic disruptions caused by droughts and heatwaves in both Germany and China.

Since our last market update, we have seen a new Prime Minister being voted in. Liz Truss has various areas in which she will need to target and her campaign suggests her economic plans will be based on lower taxes, less regulation and free trade in order to spark economic growth. We note that there is a mini budget booked for Friday 23^rd, this will be interesting as it will be her government’s next opportunity to outline their plans in more detail.

A major contributor to current inflation in the UK is energy, and Truss’s first act as Prime Minister was to cap the average household energy bills at £2,500 a year for two years could have a wide-reaching impact.

We’ve seen inflation ease a little over the last month or so, although it remains at a 40-year high, mainly because of falling petrol prices. Truss’s cap could help it fall further.

Depending on other factors, it could also lead to the inflation estimates coming down significantly and a lower risk of recession in the UK. This potentially means less need for the Bank of England to use large interest rate hikes to tackle rising prices, which is what the US did. Rates should still rise in the coming months, but probably less than markets expect. For info, the Bank of England (BoE) raised its policy rate to 1.75% in August which is an increase of 1.25% since February 2022.

On the other hand, this kind of economic support from the government could, alongside other proposed tax cuts, add more fuel to the inflationary fire we’ve seen for the best part of a year now. People have more, people spend more, and prices go up.

In the US, even though the economy has already recorded two consecutive quarters of negative economic growth this year, some economic data published in August was quite positive.

US employment data was surprisingly strong, with 110% more non-farming jobs created in July compared to market expectations and hiring had picked up significantly across sectors while the unemployment rate fell, and wages rose.

Whilst the core inflation rate is still above the Federal Reserve’s (the Fed’s) target it does seem to have passed its peak. However with strong wage inflation numbers, this could force the Fed to raise interest rates by another 0.75% when its rate-setting committee next meets in September. The Fed’s aggressive stance continued to support the US dollar throughout the month, while weighing on equity and bond market returns. 10 year treasury yields rose sharply over the month to 3.2%.

China

In China we continue to see the domestic economy struggle with the challenge surrounding growth, covid and weather-related disruptions. Economic data over the last few months has highlighted a weakness in the housing market, disappointing retail sales and in addition, activity in the service sector also seems to have lost some momentum.

The People’s Bank of China eased monetary policy further by lowering its policy rate and furthermore, China’s State Council announced new measures worth 1 trillion yuan, to support the economy. These measures are to influence the growth of their economy and increase momentum.

Conclusion

Whilst there are many economic concerns which are likely to continue for the short term, these volatile market conditions do provide investment fund managers with opportunities to purchase assets / shares at an appealing valuation point. We may not be making major changes to the funds you hold on a regular basis but the fund managers will be making changes to the underlying assets. As always, we will be in contact if we wish to make any changes to the investment funds you hold in between reviews.

We understand many of you will still be concerned about what is happening economically, it is important not to panic and make irrational decisions. We have built well-balanced portfolios that match our clients’ needs and attitude to risk and capacity for loss which are diversified across asset classes, regions and sectors.

We will continue to monitor the situation and update you all accordingly, however if you have any queries please do not hesitate to contact us.

Have you visited our website recently? Click the link to see our recent changes and to subscribe to our regular updates www.loughtons.co.uk

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Market Concerns – February 2022

Thu, 24 Feb 2022 13:40:07 +0000

Market Concerns – February 2022

As I am sure you are aware, tensions have increased between Russia and Ukraine in the last 24 hours following weeks of political manoeuvring, which has seen and global stock markets come under some pressure. Clearly this has been exacerbated following the reported skirmishes and bombings in the region overnight (23/24^th February).

Whilst we cannot predict what is going to happen in Ukraine or for that matter stock markets, we can review previous similar events and also ensure that our portfolios are appropriately diversified.

Recent history has shown us that markets are recovering a lot quicker than was previously the case and this reinforces the opinion, that it is important not to panic in these times and to hold your nerve. Clearly a panic sale of investments will crystallise the loss whereas, when we look back over the last couple of decades; we have experienced extremely turbulent times, and yet our portfolios have continued to increase in value. This takes into consideration the market falls we have experienced in early March 2020 due to the Covid 19 pandemic, mid 2007 due to the Global Financial Crisis and the 2000 Dot Com Bubble just to name a few, and within a matter of months portfolios had recovered.

In fact, we would go so far as saying that the volatility gives increased opportunities for purchasing quality assets at reduced prices and as such further potential for increased long term growth. Whilst we understand many of you will be concerned about what is happening both economically and socially, it is important not to panic and make irrational decisions. We have built well-balanced portfolios that match our clients’ needs and attitude to risk and capacity for loss which are diversified across asset classes, regions and sectors.

We will continue to monitor the situation and update you all accordingly, however if you have any queries please do not hesitate to contact us.

Have you visited our website recently? Click the link to see our recent changes and to subscribe to our regular updates www.loughtons.co.uk

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

The Financial Vulnerability Charter

Fri, 29 Oct 2021 14:49:32 +0000

The Financial Vulnerability Charter

Will Loughton today announced that ‘Loughtons’ have pledged our support to the Financial Vulnerability Taskforce’s new Charter. It is aimed at protecting those who are in vulnerable circumstances, to give them confidence when dealing with a financial planning firm and ensure that they will be treated fairly and responsibly. We welcome the opportunity to demonstrate our focus in this area and look forward to learning and developing with the FVT.

What is the Financial Vulnerability Taskforce?

The Financial Vulnerability Taskforce is a newly created independent and inclusive representative body covering the personal finance sector. Its ultimate purpose is to promote greater understanding of vulnerability, encourage appropriate behaviours and establish good practice amongst personal finance professionals in respect of people who find themselves in vulnerable circumstances.

What is the Charter?

The Charter sets out guidance for firms on how to best serve those clients in vulnerable circumstances. It encourages firms to implement plans and policies to best suit those in different vulnerable circumstances and requires them to commit to enact and actively support the 9 statements of the Charter.

These statements are surrounding the following subjects:

Making advice easier to understand
Placing your interests above all else
Understanding how your circumstances might make you vulnerable
Not making assumptions about you
Not labelling you
Dealing with you sensitively
Adapting processes and maintaining your confidentiality
Ensuring staff are knowledgeable and appropriately trained
Taking appropriate action if you are in harm’s way

To see all the statements in depth, use the link here.

If you would like to discuss any of the points above and have any questions on the subject, please do not hesitate to send us and email to admin@www.loughtons.co.uk with your details and one of our team will be happy to get back to you.

Have you visited our website recently? Click the link to see our recent changes and to subscribe to our regular updates www.loughtons.co.uk

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Upcoming changes to Buy to Let EPC Rating requirements

Tue, 26 Oct 2021 14:53:40 +0000

Upcoming changes to Buy to Let EPC Rating requirements

The Government has announced that they are changing the rules surrounding Energy Performance Certificate (EPC) Ratings on all properties being let out. This is known as the Minimum Energy Efficiency Standard (MEES). Although it sounds harmless enough, a large number of properties in the UK will be affected and, without planning properly, landlords could be hit with an unexpected bill or fine stretching into the thousands. These rules are coming into effect to help the Government hit its target of having net-zero carbon emissions by 2050.

What Is An Energy Performance Certificate (EPC) Rating?

Introduced in 2007, an EPC Rating is the way your property’s energy efficiency is reviewed by EPC assessors. This must be completed at least every 10 years and must be valid and in date before you can sell or rent your property.

EPC ratings are based on the following:

The amount of energy used per m²
The level of carbon dioxide emissions (given in tonnes per year)

The Rules Until 2025

Since the 1^st of April 2020, all new tenancies require the property to have an Energy Performance Certificate (EPC) of E or above.
This also applies to Buy to Let (BTL) mortgage applications too.

The Rules From 2025:

As of 2025, ALL buy to let properties starting a new tenancy will require an EPC rating of C or above.
Existing tenancies have until 2028 to bring their properties up to standard.

Check if these changes will affect your BTL property on the government website using the link HERE.

Our Mortgage Expert Lucy Loughton urges all BTL landlords to consider these changes and welcomes questions from owners or prospective landlords who require further information on this subject.

Consequences For Breaking These Rules:

At present, local authorities can serve landlords with a compliance notice and issue a fine of up to £5,000 per property.
From 2025 the fines are set to rise to £30,000 per property.
For advertising without displaying a valid EPC, you may receive a £500 fine per advertisement

Further points of interest:

The maximum you are required to spend on making the property more efficient is £3,500 including VAT before they accept that you have done what can be reasonably expected to improve the rating. However, there are also calls from environmentalists to raise the spend cap from £3,500 to force landlords to spend up to £15,000-£30,000 to make necessary improvements in order to achieve the EPC rating required.
Though this legislation is progressing, there are those who suggest that the pandemic has made this task too difficult for UK landlords and that they will be unlikely to afford this.
A third of UK landlords surveyed by the mortgage lender ‘The Mortgage Works’ said they do not believe their properties can reach the desired ‘C Rating’ and will therefore likely have to pay the full £3,500 spending cap.

Have you visited our website recently? Click the link to see our recent changes and to subscribe to our regular updates www.loughtons.co.uk

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Economic & Market Outlook – October 2021

Thu, 21 Oct 2021 11:55:04 +0000

Economic & Market Outlook – October 2021

In the last few months, we have seen global growth slow down largely due to the potential of inflation across the developed economies, the increasing US debt and the tightening of Chinese internal regulations. This has been compounded by recent economic data which shows that we are now past the peak growth of a few months ago and are now in a different economic position, when growth was positive and accelerating.

Inflationary Pressures

Globally, we are now entering a stage where the future of interest rates is becoming more sensitive to inflation dynamics. With the inflation figures showing a more persistent upward trend across the globe we are seeing central banks setting the scene for a potential interest rate rises in 2022 which is slightly earlier than we anticipated. The critical question we must ask ourselves is, will this inflation be temporary or long lasting?

Furthermore, Covid has; amongst other things, helped to create a supply shortage and has made it more challenging for manufactures to meet their orders and this is not just a UK issue it is a common global theme. This in turn has increased demand within various sectors and has caused increased costs and as such is leading to additional inflationary pressures.

Strangely, unemployment benefits in the US appear to have discouraged workers from rushing back to work; figures have indicated that approx. 50% of employees who lost their jobs were financially better off receiving these benefits rather than working. This has therefore forced employers to entice staff back to work which has led to wage growth in recent months. Now these more generous enhanced benefits are ending, unemployed people should start to return to work and help the recovery of leisure and hospitality sectors which are still struggling.

US Debt

In the US, there is a concern that the Treasury will run out of funds somewhere around the middle of October. However, Congress has voted to extend the debt limit through to early December. The extension has provided the US Government with additional time to resolve this although it is likely some compromises will be needed.

China

Sentiment towards China will likely remain challenged in the near-term as it focuses on creating a more resilient economy, however the longer-term risk-reward looks attractive.

China’s recent policy shift in education, property, healthcare is about creating more equality within their population and whilst this is not new in terms of content, they have changed their implementation. There are issues with the rebalancing of the Chinese economy and large inequality has become more evident within the country (as well as data security issues).

The context is that China is looking to create a more resilient economy – there is an acceptance that lower growth is necessary to reposition the economy. This is not by any means a reason to step away from investing in China; the country is still growing more quickly than many others, and they will still become the largest economy in the world eventually.

Summary

Notwithstanding the headwinds and the volatility that we are likely to encounter in global economies, we will continue to work with you to assess your objectives and ensure you have a well-balanced portfolio that matches your attitude for risk and capacity for loss. We will consider what the impact the current stage in the economic cycle has on your exposure to various assets. Remember, volatility can be partially mitigated by diversifying investments suitably across a broad range of asset classes.

Have you visited our website recently? Click the link to see our recent changes and to subscribe to our regular updates www.loughtons.co.uk

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Loughtons IFA welcomes Max Taylor to the team

Wed, 06 Oct 2021 12:48:53 +0000

Loughtons are delighted to announce that we have taken on an apprentice Financial Adviser, Max Taylor.

Max has recently returned to his native North Devon, having formally worked in project management roles in London. He holds a degree in International Business Management and is relishing the challenge of both working and studying for his formal Chartered Insurance Institute Financial Planning qualifications.

Richard Loughton commented, “following the success of both Lucy & Will in achieving this combined target, we are confident that we are able to help Max follow in their footsteps and become a qualified member of the team”.

Spring Budget – March 2021

Fri, 05 Mar 2021 12:40:51 +0000

SPRING BUDGET – March 2021

Following the Spring Budget 2021, please see below a summary of the main financial points:

Income tax

The Personal Allowance for 2021/22 is increasing to £12,570 and the basic rate band to £37,700 meaning a higher rate threshold of £50,270.
These figures will then be frozen until April 2026.
There are no changes to the dividend allowance, personal savings allowance or starting rate band for savings.

The National Insurance contributions Upper Earnings Limit and Upper Profits Limit will remain aligned to the higher rate threshold of £50,270 for 2021/22 to 2025/26.

Pensions

The Lifetime allowance for pensions is frozen at £1,073,100 until April 2026.
There are no changes to the annual allowance, money purchase annual allowance or tapered annual allowance figures or rules.

Capital gains tax

The capital gains tax annual exempt amount is frozen at £12,300 until April 2026.
There were no changes made to the CGT rates.

Inheritance tax

The inheritance tax nil rate band is frozen at £325,000 and residence nil rate band at £175,000 until April 2026.
The residence nil rate band taper threshold remains at £2 million until April 2026.

Investments

The ISA subscription limit remains at £20,000 in 2021/22.
The Junior ISA and Child Trust Fund subscription limits remain at £9,000 in 2021/22.

Businesses

Corporation tax:

Will remain at 19% for tax years 2021/22 and 2022/23.
It will the increase to 25% in 2023/24.
However, for companies with profits of no more than £50,000, the rate will remain at 19%.
There will be a tapering of the rate for companies with profits over £50,000 but less than £250,000 so only companies with profits above £250,000 will suffer the full 25% rate.
Companies with profits between £50,000 and £250,000 will be taxed at the main rate of 25% but will be able to claim marginal relief.

Temporary extension of carry back of trading losses:

The government will temporarily extend the period over which incorporated and unincorporated businesses may carry-back trading losses from one year to three years.
This extension will apply to a maximum £2,000,000 of unused trading losses made in each of the tax years 2020/21 and 2021/22 by unincorporated businesses.

Stamp duty land tax (SDLT)

The temporary cut in England and Northern Ireland is extended until September.
The £500,000 nil rate band will be extended until 30 June 2021 then it will be set at £250,000 until 30 September 2021 before returning to its standard level of £125,000 on 1 October 2021.
Non-UK resident SDLT: A Stamp Duty Land Tax surcharge is introduced on non-UK residents purchasing residential property in England and Northern Ireland with effect from 1 April 2021. The surcharge will be 2% above the existing residential rates.

Coronavirus support schemes

Coronavirus Job Support Scheme – Furlough

This scheme will be extended to September 2021 across the UK.
Employer contribution will though be required of 10% required in July and 20% in August and September.

Self Employment Income Support Scheme (SEISS)

Extended to September 2021 across the UK.
People with those who filed a tax return in 2019/20 are now able to claim for the first time.

Taxation of coronavirus support payments

Grants from the Self-Employment Income Support Scheme (SEISS) made on or after 6 April 2021 are to be taxed in the year of receipt.
This measure will have effect for the tax year 2020 to 2021 and subsequent tax years.
If a person was not entitled to SEISS payment then they will be subject to a 100% tax charge if they receive payment to which they are not entitled. This measure will allow HMRC to recover payments where an individual was entitled to the grant at the time of claim but subsequently ceases to be entitled to all or part of the grant.

New mortgage guarantee scheme

Enable all UK homebuyers to secure a 95% mortgage on properties up to £600,000 – only a 5% deposit needed.

VAT

The VAT registration and deregistration thresholds will not change for a further period of two years from 1 April 2022.
Therefore, the taxable turnover threshold which determines whether a person must be registered for VAT will remain at £85,000 and the taxable turnover threshold which determines whether a person may apply for deregistration will remain at £83,000.
The further 2 year period ends on 31 March 2024.
VAT relief – still halved at 12.5% to help retail and tourism industry in particular.
Will not revert to standard 20% until next year.
This should reduce VAT receipts this year by almost £5bn.

If you wish to discuss any of the above with relation to your own finances and financial plan, please feel to call us on 01626 833225 or email us to find out more.

Have you visited our website recently? Click the link to see our recent changes and to subscribe to our regular updates www.loughtons.co.uk

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Economic and Market Update

Fri, 15 Jan 2021 13:12:25 +0000

Economic & Market Outlook – January 2021

Happy New Year !!!

Coronavirus

2021 has started with another National Lockdown and the accelerated roll out of the Covid-19 Vaccine. We currently have the fastest roll out of this vaccine with the US close behind, although Europe are still yet to approve Oxford-AstraZeneca vaccine and therefore their distribution is much slower. Consequently, there is a great boost to the UK economy and gives us increased confidence of some normality this year.

The UK is currently focusing on vaccinating their targeted group of 70 year olds +; this makes up 13% of our population but has contributed to over 80% of Covid-19 deaths (data as 12/01/2021). The Government plan on completely vaccinating this age group by mid February and for ages 50-69 to be vaccinated by the end of April. The US is following a similar structure.

Whilst the current National Lockdown has created further implications for the recovery of stock markets in 2021, the outlook is still positive with the vaccine, continuation of financial help from the government and the likelihood of interest rates remaining low.

The US

In the US we have seen the Democrats take control of the Senate and will now allow them to set the agenda. They will already be looking ahead to the mid term elections in 2022 with the plan to gain more seats in the Senate. It is therefore reasonable to suggest that tax rates will not change significantly until at least after these elections. They will concentrate on the US economy recovery by providing continuing fiscal stimulus. US inflation is currently 1.4% with unemployment at 6.7%. The Federal Reserve (FED) has targets of 2% for inflation and 4% for unemployment before they will look at reducing Quantitative Easing and increasing interest rates.

Brexit

30^th December saw a Brexit deal approved and 2021 commenced with a bang. The FTSE100 rose and Sterling had a bit of a bounce. The deal gives the UK and the EU a zero tariff and zero quota, access to each other’s markets and allows us to co-operate with our biggest trading partner. It is worth noting though that the Brexit process is still not complete, and the EU Parliament needs to make this official which is expected to happen by the end of February. Furthermore, there are many areas where the agreement needs to be developed and / or put into practice.

Summary

The combination of the roll out of the Covid-19 vaccines, Brexit deal and US election have all added confidence to Global stock markets. With the likelihood of some sort of normality in the second half of the year, we could see households and businesses start to spend the excess money balances accumulated in 2020. This means that consumption, investment and employment are all likely to recover at a much more rapid pace than after a typical recession, and therefore hopefully generating an equally strong economic recovery.

Have you visited our website recently? Click the link to see our recent changes and to subscribe to our regular updates www.loughtons.co.uk

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Economic and Market Update

Tue, 22 Dec 2020 09:39:41 +0000

Economic & Market Outlook – December 2020

The likely contrast between 2020 & 2021

With major European economies all experiencing either new nationwide or tiered lockdowns and the US experiencing new records in daily infections, there is no immediate relief from the Covid-19 pandemic in sight. This means that the fourth quarter of 2020 will most likely see declines in real Gross Domestic Product (GDP). Going into 2021 we could experience a weak first quarter in the northern hemisphere while the virus persists, to be followed by relatively strong bounce-backs through the second and third quarters, especially as the roll out of the vaccine spreads.

These recoveries will be boosted by the huge monetary and fiscal stimulus policies from central banks and governments across the developed world. Therefore, the recovery, once the virus is dealt with, is likely to be much stronger than the recovery which occurred following the Global Financial Crisis (GFC) a decade ago. In 2009/10 banks and households needed to repair balance sheets by raising capital and/or reducing borrowing and therefore were unable to take advantage of low interest rates to expand borrowing and spending.

Now in 2020/21 money and credit have mostly been growing strongly in leading economies. This explains why equity and housing markets have been buoyant. This invariably leads to strong growth of spending, but this will only happen once the uncertainties and social distancing associated with the virus are largely overcome.

So if 2020 was dominated by the pandemic, the lockdowns and the enormous government and central bank programmes to overcome the effects of the economic downturns, 2021 is likely to be dominated by the speed with which effective vaccines can be deployed and the effects of the huge financial stimulus policies.

During 2020 the only tools that governments were able to rely on to suppress the virus were various forms of social distancing, lockdowns or working from home, and severe restrictions on a whole range of economic activity, including services such as travel, hospitality, and those activities that brought together large numbers of people such as theatres, live concerts, and sports events at stadiums. Not surprisingly the economic consequences have been dire with the largest economic declines in activity ever recorded.

In 2021 we can expect to see the roll out of adequate numbers of vaccine doses which will probably take most of the first half of 2021 Therefore, we are likely to see a return to some sort of normality in the second half of the year. However, once the return to normality is widely perceived to be under way with consumers and businesses regaining confidence, we could see a significant transformation of the economic environment. Furthermore, in the second half of 2021 we could also see households and businesses start to spend the excess money balances accumulated in 2020. This means that consumption, investment and employment are all likely to recover at a much more rapid pace than after a typical recession, and therefore generating a strong bounce-back.

Theoretically we should then expect a further stage in the process, being the impact on consumer price inflation. However, this may not occur until 2022, depending upon how cautious consumers and businesses remain.

Important Information

This post is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Loughtons Independent Financial Advisers does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Loughtons Independent Financial Advisers has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Economic and Market Update

Thu, 30 Apr 2020 17:13:02 +0000

From record highs in the Stock-markets at the beginning of the year, the Coronavirus pandemic, an event unexpected in its arrival has been unprecedented in its effect. Stock-Markets endured their worst 3-week period in history, while liquidity in the bond markets evaporated. Interest rates were cut to zero and governments in the UK and the US were forced to inject “wartime levels of investment.”

In the modern day, there are few parallels to the current economic environment. Unemployment is growing and the second quarter earnings are predicted to fall by 15-20%. As new cases of the virus level off, however, both measures are expected to bounce back before the end of the year.

Predicting the path of the markets’ in these uncharted waters isn’t easy. However, as new infections in some of the worst-affected countries begin to plateau, the picture becomes a little bit clearer.

There are 3 separate, yet linked elements to the current situation we find ourselves in.

Economic Recovery – What shape will the recovery take?

Economists are debating the “shape” of the economic recovery, once the Western world emerges from its “lockdown”. The most widely expected outcome is a “V” shaped recovery, with a sharp decline in Gross Domestic Product (GDP) in the second quarter of 2020 largely reversing by the end of the year. This is based on what is being observed in China, where the economy is returning to normal as cases of the virus decline. In such circumstances, markets would likely follow a similar pattern.

An alternative is a “W” shaped recovery, where once lockdown is eased there is a second wave of infection, leading to a further contraction in the economy. While the “V” shaped scenario appears most probable, investors should be aware of the risks that restarting the economy without a surge in new cases will take a delicate balance.

Financial Crisis – Central Banks will do whatever it takes

This has largely been averted due to the massive stimulus by central banks by cutting interest rates close to zero and restarting quantitative easing. This has in turn helped boost investor sentiment and these initiatives have helped improve liquidity and unblock credit markets, thus helping to stabilise the economy.

Medical Crisis – The push towards finding a vaccine

Whilst we cannot ignore the incredible impact this virus has had on lives and families around the world, new cases of infection and deaths are generally slowing down and governments are planning the gradual ways of exiting the lockdowns. There is some phenomenal work from scientists around the globe looking to create a vaccine for the virus and use known drugs to ease the effects on human lives.

Opportunities for long term investors

Global Stock-markets are looking through the current situation and attempting to predict the situation in the next 6-12 months and beyond. For investors with a medium to long-term time horizon, the current sell-off of shares that we have experienced presents a number of opportunities. In the Great Depression, a downward ‘bear’ market with a decline of greater than 30% was followed by an average 70% return in the 2 years following the low point. Whilst today’s circumstances are different, there is reason to believe that global stock markets that looked expensive at the turn of the year could now offer more reasonable valuations with good opportunities going forward.

We will continue to work with you to assess your objectives and ensure you have a well-balanced portfolio that matches your appetite for risk and capacity for loss. We will consider what the impact the current stage in the economic cycle has on your exposure to various assets. Remember, volatility can be partially mitigated by diversifying investments suitably across a broad range of asset classes.

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Market Volatility – How should Investors respond?

Fri, 13 Mar 2020 08:30:03 +0000

Given recent market events, I am sure it wouldn’t have escaped your attention at the impact that this is having on world stock markets, as they adjust to the short-term economic implications (the outlook for earnings from companies) due to the Coronavirus outbreak.

In fact, the one thing I can guarantee is that you’re aware of ‘bad news’. It’s the media’s job to tell us ‘bad news’ and ‘bad news’ is what sells media. ‘Bad news’ is endless and seemingly perpetual as we now have the state of 24/7 ‘bad news’ that repeats and repeats, on and on. The only escape is to turn off the source of the media, because I can assure you that the media doesn’t have your financial planning best interests at heart.

Modern media moves from crisis to panic and back to crisis. We are never ‘crisis-less’. Don’t make investment decisions based on what you read or hear from a publication built for the sole purpose of grabbing your attention and selling advertising.

However, it is important to understand that market volatility, like we have experienced in recent days, is perfectly normal, however uneasy this may feel.

When the value of your investments is falling, it’s hard to imagine them ever bouncing back. We start to listen to our emotions. What were we listening to when markets were rising?

Understanding our Decision Making

Firstly, lets put this into some context. Investment markets rise for 75% of the time and they fall for 25% of the time. Yet, it’s the falls that people remember for longer. We call this loss aversion, and this is one example of Behavioural Finance in operation, which in this context can help us to understand how the mind can help or hinder investment success.

One should remember that this sudden change in direction from some financially illiterate investors is off the back of a 12-year bull market (a market in which share prices are rising) following the financial crisis of 2008/09.

Behavioural finance holds out the prospect of a better understanding of financial market behaviour and scope for investors to make better investment decisions based on an understanding of the potential pitfalls. It helps us to understand the psychology of financial decision-making.

Most people know that emotions affect investment decisions. Behavioural finance helps us to understand the role of our biases in decision making, even if we are not aware of them!

These biases can affect all types of decision making, but they have implications in relation to money and investing and tend to sit deeply within our psyche. They could serve us well in certain circumstances but in investment they may lead us to unhelpful or even hurtful decisions. An analysis of these biases is beyond the scope of this article, but it is important to know that they exist whether we are aware of them or not.

Working with a financial planning firm can help us to become aware of them and how they may be causing us to react in a certain way, sometimes to our detriment. With help from an adviser, we can begin to loosen their grip and make decisions that work in our long-term best interests.

If you cannot control your emotions, you cannot control your money.

Warren Buffett

Key Facts about Stock Markets

Market Corrections are normal

The long-term trend of markets is upwards but is interrupted by market corrections. This is perfectly normal but cannot be predicted. Everyone remembers the financial crisis of 2008, but what followed was the longest bull market in recent history.

Just like the pattern of the seasons, there are clear patterns in financial markets that are evident through many decades of data.

Since 1900, market corrections occur on average once per year. In other words, corrections are a regular part of financial seasons – and you can expect to see as many corrections as birthdays throughout your life.

The average correction is 54 days long, occurs once a year and the market declines on average 13.5%.

The uncertainty of a correction can prompt people to make big mistakes – but in reality, most corrections are over before you know it. If you do nothing, it’s likely the storm will pass.

Morningstar see volatility as an investment opportunity – see their short video here.

Instead of living in fear of corrections, you and I have to accept them as regular occurrences — like spring, summer, fall, and winter.

Tony Robbins

Fewer Than 20% Of all Corrections turn into a Bear Market

When the stock market starts falling it can be tempting to abandon ship by selling assets and moving into cash. However, to do so could be a big mistake. You would likely be selling all of your assets at a low, right before the market rebounds!

Put another way, 80% of corrections are just short breaks in otherwise intact bull markets – meaning that selling early would make you miss the rest of the upwards trend.

Nobody can predict consistently whether the market will rise or fall

The media perpetuates a myth that, if you’re smart enough, you can predict the market’s moves and avoid the falls.

I’ve never met or heard of anyone that can successfully predict markets, but many try. To me that is folly. We have to learn to align our financial planning in harmony with markets.

There have been many predictions over the years from some very famous financial commentators, which have been completely wrong.

The only value of stock forecasters is to make fortune-tellers look good.

Warren Buffett

The market has always risen, despite short-term setbacks

Market drops are a very regular occurrence. For example, the S&P 500 – the main index that tracks the U.S stock market – has fallen on average 14.2% at least one point each year between 1980-2015. Like winter, these drops are a part of the market’s seasons.

Over this period of time, despite these temporary drops, the market ended up achieving a positive return 27 of 36 years. That’s 75% of the time!

The market generally rises over the long run — even though we hit a huge number of potholes along the way. Over this period of time, there have been multiple wars, the worst financial crisis since the Great Depression, and many other roadblocks – despite this, the market is still up!

The biggest danger isn’t a correction or a bear market, it’s being out of the market.

Tony Robbins

Historically, bear markets have occurred every three to five years

In the 115-year span between 1900-2015, there have been 34 bear markets. In those situations, stocks dropped 20% or more.

Bear markets become Bull Markets

Do you remember how fragile the world seemed in 2008 when banks were collapsing, and the stock market was in free fall? When you pictured the future, what did it look like? How do you picture the future today?

The fact is, once a bear market ends, the following 12 months can see crucial market gains.

The stock market is a device for transferring money from the impatient to the patient.

Warren Buffett

The greatest danger is being out of the market

From 1996 through 2015, the S&P 500 returned an average of 8.2% a year. But if you missed out on the top 10 trading days during those 20 years, your returns dwindled to just 4.5% a year.

If you missed out on the top 20 trading days, your returns were just 2.1%.

And if you missed out on the top 30 trading days? Your returns vanished into thin air, falling all the way to nil!

You can’t win by sitting on the bench. You have to be in the game.

To put it another way, fear isn’t rewarded. Courage is.

Tony Robbins

Our Approach

From these interesting facts we can develop a set of principles and constants for addressing uncertainty. Here are a selection that I hope are helpful.

The stock market rewards the patient and punishes the rest.
The risk in the stock market is not being in it. Don’t react and sell at the bottom. Take a long-term approach and possibly consider adding more to investments during market falls (subject to advice).
When you invest in the stock market (the great companies of the world) you’re investing in real companies, who sell real things to real people.
Consider drawing income / regular withdrawals from cash reserves rather than your portfolio during market falls. That’s why you kept an emergency fund.
Stock market volatility is always temporary, always expected and always feared by those who don’t understand it. When the markets are down, we refer to this as a ‘big sale’. The advance is permanent, the declines are temporary.
No one can time the markets, identify in advance a winning sector, winning fund manager or winning country. Therefore, we don’t try to do this or claim to know how to do it. We operate from a position of diversification, ensuring you don’t hold all of your eggs in one basket.
Lifetime investing success has very little to do with investment returns, but a lot to do with investor behaviour. Investing is more emotional than intellectual.
Successful investing is about ‘time in’ the markets and certainly not about ‘timing’ the markets.
Every successful investor continuously works on their financial plan, every failed investor continuously reacts to the market and current events.

Implications for Investors?

Markets will remain volatile and investors should ensure that their investments remain suitable for their circumstances and hold enough cash for any rainy-day needs. Those who are accumulating money could consider adding to portfolios when markets are lower. Those decumulating from their capital, for example when drawing an income, need to look carefully to guard against drawing down too much of their capital and eroding the underlying capital base. It is also essential to make use of tax allowances especially as these are constantly under review by the government. Experience tells us that our own human emotion is the biggest threat to our own portfolio. Investment decisions based upon emotion are nearly always wrong!

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Coronavirus and the effects on Stock Markets

Wed, 11 Mar 2020 12:46:36 +0000

Around the world, headlines in early 2020 have been dominated by the outbreak of coronavirus in China. As the virus has spread globally, taking thousands of lives, it has dealt a significant blow to global stock markets. But despite the clear impact that the epidemic has had in China, and now more globally, are global investors right to be quite so worried about its long-term effect?

At times like this, there is inevitably a temptation to panic. After all, if the coronavirus causes fatalities on a large scale, it would not only be tragic, but the implications for the global economy would be profound.

In a worst-case scenario, we could see a global economic recession leading to much lower corporate profits and many companies failing altogether. However, we must keep perspective. This is not the world’s first deadly epidemic. Nor is it the first-time stock-markets have been moved by one. During the past decade, share prices were affected by viral outbreaks of Zika and Ebola – twice, among several others. However, historic patterns show that the effects have often proved temporary, with only minimal long-term impact, if any.

If we consider global equity performance (as measured by the MSCI All Country World Index of the world’s largest listed shares) after previous epidemic outbreaks, we see that any effect over a one-month period did not persist longer term. One month after the 2014 Ebola outbreak, for instance, global markets were down by 0.1%, but they were up by 4.4% after six months. After the 2018 Ebola outbreak, the MSCI ACWI was down 7.5% after one month but only down 3.5% over six months.

Of course, there will have been other factors driving markets during these periods, as there are today. Nonetheless, it shows how initial concerns can abate over time, perhaps as the picture becomes clearer and the worst-case scenario is averted. Investors should also be clear not to conflate temporary market falls with permanent losses.

We cannot know how the coronavirus will continue to affect markets, and we cannot rely on the past as any guide to what will happen this time. Remember, past performance is no guide to future performance.

Keeping a long-term perspective

A key lesson from the sharp market fluctuations that have accompanied past epidemics is that panic selling can prove costly. If you had sold your investments during earlier outbreaks and then missed out on the subsequent recovery in prices, you would have likely ended up worse off. After all, it is notoriously difficult to try to time the market and buy back in at the right moment.

For professional investors and fund managers, however, market turmoil created by ‘episodes’ like this can provide opportunities to generate returns for their clients. By staying objective and focusing on the fundamentals, they can invest in long-term value opportunities where they arise.

We may not know how the coronavirus will further shape global markets, but we can learn from previous mistakes. Rather than getting caught up in the initial panic, it is important to keep perspective and focus on your longer-term goals.

The information below illustrates the potential effects of missing out on the best days in the markets i.e. if an investor was to crystallise losses now and miss out on future market recoveries.

Key points to keep in mind are:

When stock markets become volatile, it is usually best to resist making changes to your long-term investment strategy.
It is too easy to miss the best gains when you try to time the stock market.
Time, not timing, is the key to investing.

Volatility

Volatility is an investment term for when the stock market experiences periods of unpredictable, and sometimes sharp, rises and falls. People often think about volatility only in connection to dramatic drops in prices, but it can also refer to sudden rises as well. So, it’s really just a way of describing a market that’s going through some turbulence.Volatility is caused by a wide range of economic and political factors. From news affecting a particular industry sector, to government policy changes, political tensions or upheavals; anything that creates uncertainty and causes some investors to sell and others to buy can lead to volatility. In a volatile market prices aren’t always an accurate reflection of real worth. A sudden swing up or down can make an investment suddenly seem worth more or less than it really is over the long term.

Volatility is perfectly normal and is inevitable in a healthy market, and every long-term investor will experience it from time to time. Changes in the prices of stocks are natural in a functioning market. The value of individual companies can go up and down over time as their particular industries become more or less important, and policies and governments change every few years. So it’s important to be comfortable with the idea of seeing the market change. By being prepared for volatility at the start of an investment journey means you are less likely to be surprised by short-term events and stay focused on your long-term goals.

Our Approach

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Coronavirus and the impact on Global Economies

Fri, 28 Feb 2020 08:05:22 +0000

Stock-Markets don’t like uncertainty, and the coronavirus is having an effect on global markets and economic growth. Regionally, it was the Asian markets which have seen the greatest falls initially. However, this slump was followed by a rally that made back most of the losses.

But the spread of the virus outside of China and the potential for broader disruptions to both activity and demand has resulted in downturns in global markets across the US, UK and Europe this week.

While demand for goods and services has so far held up outside of China, the disruption to global supply chains (exports) running through China, Korea and, potentially, Japan is likely to take a toll on production and if this continues into the second quarter of 2020, this could affect the already weakening manufacturing sectors, with implications for jobs and the wider global economies.

Luxury goods, leisure and holiday firms have seen their share prices fall significantly this year. Sectors which are reliant on trade to distribute their products are also at risk. Car makers and industrials rely on the free movement of components such as parts or materials in their construction. If borders are closed and sea tankers are grounded, this could impact supply chains.

The Chinese economy is already under strain. Industry, the production of goods for sale or export, makes up 41% of its Gross Domestic Product (GDP) and if factory workers required to convert raw materials are unable to travel, this will inevitably slow.

Entertainment, retail and tourism services, are responsible for 52% of GDP. Global corporations are banning employees from visiting China for the foreseeable future and many major airlines have cancelled flights. It’s not will coronavirus impact Chinese growth, but how long the impact lasts.

Chinese GDP is worth $14 trillion and makes up around 16% of the global economy. A slowdown in China will impact the global economy. The National Institute of Economic and Social Research forecasts GDP growth of 5.9% for China this year, resulting in global growth of 3.1%. These figures are likely to be weakened by current events, particularly if coronavirus becomes pandemic.

What could investors do?

While there’s no doubt coronavirus will continue to impact markets in the short term, that doesn’t necessarily mean long-term investors should be overly concerned. Timing the market is notoriously difficult and trading on news events can often lead to bad outcomes. Panic selling often locks in losses and getting back into the market is often hard to do.

China has shown repeated her ability to shrug off even the most persisten issues in the past, as the chart below illustrates:

Behavioural finance shows us that selling at the top and buying at the bottom goes against our instincts but is exactly what you should do to maximise your chances of investing success. Of course, there’s no way of knowing when or where the bottom will be, and volatility can be tough to endure. All investments rise and fall in value, so you could make a loss.

For our investors, with a 10-plus year view, we think the best course of action is to do nothing and stick with it. For example, within four years both the FTSE 100 and the S&P 500 had shrugged off the losses of the global financial crisis of 2007-2009. There are no guarantees this will be repeated.

Coronavirus aside, we will continue to assess your objectives and ensure you have a well-balanced portfolio that matches your appetite for risk and capacity for loss. We will consider what the impact the current stage in the economic cycle has on your exposure to various assets. Remember, volatility can be partially mitigated by diversifying investments suitably across a broad range of asset classes.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Economic & Market Update

Tue, 14 Jan 2020 21:32:32 +0000

The US and their impact on Global Markets

When it comes to financial markets, perfect vision is impossible. This time last year, markets had endured their worst December since 1970 and investors were bracing themselves for recession. By March, the US Federal Reserve (Fed) had altered its plans for higher interest rates to counter slowing economic growth and financial markets responded favourably. We have become accustomed to the mood of markets being prone to sudden change. In 2019, episodes of volatility resulted from US/China trade tensions, fears of a global slowdown and, in the UK, the threat of a no-deal Brexit. None of these issues are firmly resolved and they may remain the dominant storylines of 2020.

With the FED cutting interest rates three times in 2019, the result was good news for the market. As the world’s largest economy, what happens in America has implications globally and the return to easier monetary policy was a focal point in the market gains achieved in 2019. It was also good news for the consumer, with lower interest rates helping to increase wages and household spending. This allowed the US economy to fend off the worst effects of a recession in manufacturing. As recent as December 2019 the Fed indicated that there will be no further changes to interest rates until 2021 and such expectations are now priced into markets.

Geopolitics

Donald Trump approved of the FED’s interest rate cuts and he will be hoping to get his way again, in November 2020 as he attempts to secure a second term in the Oval Office.

Throughout his first tenure he has supervised a record economic expansion (by length) that has proved more resilient than many predicted. It has been both helped (through tax cuts) and hindered (by trade wars) as a result of his own initiatives. At 3.5% unemployment he is presiding over its lowest level since 1969. The Presidential election will have an effect on the path of global markets in 2020 and another four years of Trump may, surprisingly, be investors’ preferred outcome.

A related issue is the trade war with China, which was the biggest driver of market uncertainty in 2019. It’s clear that tensions run deep, with the US aiming to protect its position as the dominant global superpower in the face of unprecedented Chinese expansion. As a result, the issue is likely to extend to this year’s presidential election and beyond. However, for all the rhetoric, both sides are cautious about the impact on economic growth.

Brexit

From the UK investor’s perspective, the other major issue that refuses to disappear is Brexit. In December, the market enjoyed its best day in three years following the General Election, and the new Government has wasted little time in attempting to “get Brexit done”. But for all the optimism, a Withdrawal Agreement is just the beginning. There will follow some complex negotiations on trade and the nature of any future relationship with the EU. The outlook is a little bit clearer, but the uncertainty is not yet over for UK companies.

A Brighter Outlook Is Better for Equities

In 2019 there was evidence building of a recession in the manufacturing sector and the “FAANG” stocks (Facebook, Amazon, Apple, Netflix, and Google), which for so long had all moved in an upward direction, began to fall. However, with news of a preliminary trade deal between the US and China, combined with expectations of a more orderly Brexit, economic forecasts have been revised upward. The ‘bull’ market rumbles on. Despite the brighter outlook, earnings expectations in the equity market remain cautious. In the UK, reduced risk of a “no deal” scenario helps to alleviate the uncertainties that faced UK businesses last year, while a trade truce is good for exporters.

Finally

We are all aware that things can change quickly and as the ‘bull’ market reaches its 11th birthday, it’s important for investors to remain diversified. Valuations in some areas are expensive and there are only so many levers that Central Banks have left to combat further weakness in economies. The outlook for 2020 can therefore be described as ‘a summer’s day in Scotland – reasonably bright, but you can never be sure it isn’t going to rain’.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Lifetime Allowance Charges – Are you optimising your pension?

Mon, 16 Dec 2019 08:45:05 +0000

For many the lifetime allowance (LTA) on the value of your pension savings will become an increasing concern as the tax net is reaching wider with many more people paying tax on their pension savings then ever before.

Awareness of the lifetime allowance and the implications for pension savers is now a key part of financial planning for many. So, what can be done to plan effectively in this area?

Recap of the Lifetime Allowance

Let’s start with a quick recap of the lifetime allowance framework.

The lifetime allowance was introduced in 2006 at £1.5m, peaking at £1.8m in 2012 and then reducing in stages to a low of £1m in 2016.

It currently stands at £1.055m for the 2019/20 tax year and will increase with inflation going forward (unless the rules change again).

However, it was possible to protect pension savings above the lifetime allowance in certain circumstances under various statutory protections that were introduced as part of the original pension legislation.

A check of available LTA is only made when pension benefits are drawn (known as crystallised). Every time further pension benefits are crystallised, a percentage of the lifetime allowance is used. The LTA tax charge will only start to apply when there’s no longer any LTA left to cover the amount being crystallised — in other words, when 100% has been used up. This means that the LTA charge can be deferred until as late as age 75 even where you start to draw benefits sooner.

How much is the LTA Tax Charge?

The LTA tax charge is 55% if excess funds over the LTA are taken as a lump sum (or series of lump sums). Where the excess funds over the LTA are taken as regular contributions, the tax charge is 25% tax. It is not possible to draw tax free cash from excess funds over the lifetime allowance.

In addition, when income is taken from the pension pot it’s normally taxed as income. However, the overall effective rate will normally be much less than the headline 55% rate for lump sums.

Options

There are many points to consider. Here are just a few:

Drawing a regular amount rather than a lump sum – Of the 4,500 people paying LTA tax charge in 2017/18 — two thirds of them paid 55% tax. However, there was another option – the income option is just 25% (plus income tax), so a point to consider here is whether a lump sum was needed at all. Also, did their scheme allow them to draw a regular payment and if not, could a transfer to an alternative pension scheme have reduced their tax charge? A modern flexible defined contribution pension will normally allow all available options, including the drawdown option that comes with a reduced level of LTA tax. If this was managed better one can preserve one’s wealth for longer and there’s more to pass on to beneficiaries rather than the exchequer.
When should benefits be crystallised to minimise any potential LTA tax charge? Good financial advice can help identify whether crystallisation should occur sooner or later.
How should pension benefits be drawn? Should these be drawn down fully or phased over many years? Most people will have taken many years of careful planning to accumulate their pension wealth. It’s therefore important not to damage all of the hard work by drawing down pension benefits without the same care.
When should the tax-free lump sum be drawn? At age 55? At age 75 or at some other time? These questions can be answered by working with a pension professional and analysing one’s objectives, needs and goals and overall financial circumstances.
When should excess funds above the LTA be drawn and how? As a lump sum at 55% or as income at 25% – does the pension even need to be drawn at all?
If funds are withdrawn earlier and are surplus to requirements, where could they be invested? What investment structure provides the best outcome?
What arrangements provide the best legacy for beneficiaries? Ensuring that careful consideration is given to who benefits from the pension(s) and the potential tax consequences for them.

There are therefore lots of possible variables as well as different circumstances that individuals can find themselves in both personally and financially. The unprepared and uninitiated could therefore find they inadvertently pay considerably more tax than was necessary.

It’s very important to discuss these points and the wider picture with a professional Independent Financial Adviser who can help you to consider the bigger picture, place you in an informed position and provide advice on the best way forward. Without doing so risks the potential of doing more harm than good.

A key challenge is that there are many moving parts involved. Pensions legislation is always on the agenda of the government of the day. The LTA planning window is a long term challenge for pension savers, with variables changing every year. Every previous calculation should be reviewed at each subsequent planning review with your adviser.

A key element in financial planning is the ongoing review to ensure the best outcomes, which entails a clear understanding of your needs and goals as well as the legislation applying at the time and the personal circumstances in each case.

A focus just on the LTA and mitigating the potential tax charges along however could cause problems elsewhere.

Conclusion

The Lifetime Allowance is clearly a complex part not just of pensions but within the wider context of financial planning and is to be ignored at your peril. Obtaining Independent Financial Advice concerning these complicated decisions can help to provide a useful perspective and inform the planning strategy going forwards.

This blog is intended to be for information purposes only and does not constitute financial advice, nor is it is intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Loughtons Independent Financial Advisers does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Loughtons Independent Financial Advisers has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system.

Economic & Market Update

Thu, 21 Nov 2019 17:59:23 +0000

How healthy is the US economy?

During the first half of 2019 the US economy grew by just over 2.5% in real terms, slightly ahead of typical estimates for the economy’s potential growth rate of 1.9%. At the same time, the labour market continued to create new jobs with the unemployment rate remaining low at 3.7%.

However, while consumer spending has been rising at a strong pace, business fixed investment and exports have weakened.

Household incomes have been supported by gradually increasing wage gains and high levels of employment, combined with on-going improvements in consumer balance sheets, according to surveys by the New York Federal Reserve.

The main drivers here are rising home prices, rising equity prices and diminishing indebtedness relative to income.

Consumer finances

The strength of consumer finances is an important reason for confidence that the current business cycle expansion can continue for at least another couple of years, in contrast to the leveraged condition of households immediately prior to the financial crisis of 2008-09.

In a broad sense, consumers have been gaining at the expense of businesses, as often happens in the second half of a business cycle expansion.

Corporate profits

US businesses appear to have passed peak profitability for this cycle. While profits have still been rising, margins have narrowed, and the strength of the dollar has crimped overseas earnings.

In the same vein, core capital goods shipments, a lead indicator for business investment, appear to have reached a plateau, and new export orders (from the Purchasing Managers’ Index) have been weakening.

Housing continues to make progress, aided by declines in mortgage rates. Again, housing is a lead indicator for numerous business sectors and is therefore encouraging for employment and for the purchases of a range of raw materials from timber to copper and steel.

The Conference Board’s measure of business confidence remains at or close to its high for the cycle.

Further expansion expected

All these indicators suggest that business is not in bad shape but has undoubtedly been derailed somewhat by the global slowdown in manufacturing. We expect the current US business cycle expansion to continue without overheating or being inflationary.

European Central Bank – dissent in the ranks

Draghi’s last meeting

The decision by the European Central Bank (ECB) on 12 September – at Mario Draghi’s last meeting as President of the Governing Council – to resume asset purchases of sovereign bonds at a rate of €20 billion per month (Quantitative Easing-QE) and to cut the interest rate was not welcomed by the heads of the German, Dutch, French and Austrian central banks.

Poor design

Previous episodes of QE by the ECB have been a failure largely because they have been poorly designed. If they had been designed to acquire securities from non-banks this would have raised the rate of growth in the money supply in the eurozone much more quickly and to a faster growth rate. This in turn would have increased spending growth across the eurozone and there would have been no need to resume QE purchases.

Instead, the ECB has decided to resume the same policy with the same failed methodology – buying securities from banks – which is likely to absorb substantial amounts of sovereign debt, essentially in an asset swap with the banks, without creating new deposits in the hands of firms and households, but only on the books of the ECB itself.

Weak growth environment

Therefore, the growth in the ‘money supply’ will likely continue to be too low and the eurozone is likely to remain in its self-induced weak growth environment, low inflation, and negative interest rate trap.

How is UK business investment faring amid Brexit uncertainty?

Brexit saga

The Brexit saga continues to dominate political debate in the UK while having negative effects on economic growth by maintaining a high level of “regime uncertainty” – a lack of clarity about the rules, regulations, tariffs, and competitive position of firms after the country transitions to its new relationship with the European Union.

The fluctuations in the Brexit debate continue to be reflected in two key areas: the foreign exchange market for sterling and the domestic investment scene. Elsewhere, such as in the labour market, in personal consumption spending, or in inflation trends the UK economy has continued to perform much as it did before the referendum of June 2016.

Downturn

The downturn in capital expenditures by businesses is abundantly clear. Unfortunately, these trends seem unlikely to change much until after the political and trading relationships between the UK and the EU are well on the way to resolution.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

LF Woodford Equity Income Fund (the “Fund”), a sub-fund of LF Woodford Investment Fund (the “Company”)

Thu, 17 Oct 2019 12:14:54 +0000

Introduction

Link Fund Solutions (Link), the authorised corporate director (ACD) of the LF Woodford Equity Income Fund, intends to close this fund by selling its assets and returning the proceeds to investors. This decision is awaiting approval by the Financial Conduct Authority (FCA).

Why this has happened

The decision to originally suspend dealings in the Fund was taken to protect investors following an increased level of redemptions. As a “forced seller” of its assets to meet redemptions, the values received by the Fund for such assets could have been adversely impacted and the Fund may not have received full value from the sales.

The suspension was therefore intended to give Woodford Investment Management Limited (“Woodford”), the investment manager of the Fund, time to reposition the Fund’s portfolio into more liquid investments. This would have allowed the Fund, upon lifting of the suspension of dealings in the Fund, to meet redemption requests. They sought to complete the repositioning of the Fund’s portfolio by early December 2019 to enable the Fund to re-open, but in the meantime monitor progress to ensure that this date remained achievable.

Whilst progress has been made in relation to repositioning the Fund’s portfolio, this has unfortunately not been sufficient to allow reasonable certainty as to when the repositioning would be fully achieved and when the fund could be re-opened and therefore after careful consideration Link conclude that closing the fund would be in investors’ best interests. This will allow the return of money through interim payments to investors more quickly than if the Fund had remained suspended for a longer period.

New arrangements for the management of the Fund’s assets

Woodford will, with immediate effect, cease to be the investment manager of the Fund, which has consequently been renamed the ‘LF Equity Income Fund’. Link will continue to serve as the ACD of the Fund and manage the Fund during the period prior to the commencement of the winding up in accordance with its prospectus and applicable regulatory requirements. They have allocated the Fund’s assets into two parts.

Listed Assets (Portfolio A). LFS have appointed BlackRock Advisors (UK) Limited (“BlackRock”), who have transition and investment management, trading and capital markets expertise and experience as transition manager, to prepare Portfolio A for the winding up of the Fund. During the period until winding up of the Fund commences, BlackRock will seek to sell the assets in Portfolio A and use the proceeds to purchase money market funds and FTSE 100 index instruments. This process will enable LFS to return part of investors’ cash as soon as possible once the Fund begins the winding up process.
Unlisted and certain highly Illiquid assets (Portfolio B). During the period of the suspension LFS appointed PJT Partners (UK) Limited (“Park Hill”) as a specialist broker to assist us in selling the assets in Portfolio B.

Costs

In the period leading up to the commencement of the winding up of the Fund, charges paid by the Fund to the ACD will not change. Costs associated with selling the assets will continue to be borne by the Fund and these costs at this time will be greater than they were typically in previous periods due to the requirement to sell all of the Fund’s assets. Link will keep you informed of these costs.

What this means for you

Link expects to start winding up the fund from 17 January 2020. The assets of the Fund will start to be realised, taking into account of any liabilities which the Fund owes, and of the costs incurred in the winding up. Proceeds will be placed into cash in your ISA, Collective, Pension accounts as a number of capital payments. These will then be available for reinvestment.

It is anticipated that the first capital payment will be paid to you and all other investors by the end of January 2020. The size of this first amount will depend upon how quickly the value of the Fund’s assets can be realized. Any remaining assets of the Fund will continue to be sold over time in an orderly manner to seek to limit the loss of value which would be the key risk if they were sold on a forced or “fire sale” basis. Link will continue to provide regular updates in respect of the sale of the Fund’s assets and the payment of further capital distributions until the completion of the winding up of the Fund.

Tax Consequences

Please be aware that the receipt of your proceeds from the winding up of the Fund will be deemed to be part disposals of your shares in the Fund for capital gains tax purposes and may, if not invested in a pension or ISA, depending on your personal circumstances, give rise to a capital gains tax liability. If you are in any doubt as to the taxation consequences of this action you should seek professional advice.

Further Information

Please do let us know if you have any specific questions. A questions and answers document will be available at woodford.linkfundsolutions.co.uk and on request from Link. They will continue to calculate and publish the Net Asset Value per share on a daily basis for information purposes only, which will also be published on our website at www.linkfundsolutions.co.uk.

Economic & Market Update

Tue, 15 Oct 2019 18:24:06 +0000

Trade Wars

Throughout 2019 the rhetoric between the US and China has become more hard line. On the face of it an impasse in trade talks leads to increased tariffs and slower economic growth as the Chinese have decided to take a firmer line in negotiations, reducing the chances of a deal.

At some stage the uncertainty is likely to knock consumer spending, leading to lower global growth, although possibly not a full-blown recession.

Logically, it is in both countries’ interests to reach an agreement. Trump needs a stronger economy ahead of the 2020 election. President Xi Jinping needs the strong economic growth for stability in China, lifting people out of poverty and providing jobs for the young.

More recently, however, all the signs are that an impasse is likely that would cause a further deterioration in the economic outlook, despite a partial deal being agreed with the suspension of one set of impending tariffs, but the planned tariffs for December remaining in place.

Global Interest Rates & the effect on Stock-markets

Global Economies sit on a ‘ridge’. Central banks are delicately balancing the economies between, on the one side, much stronger growth driven by low interest rates and Quantitative Easing (QE) and, on the other, a deteriorating economic environment, low inflation, maybe even deflation.

For the past 10 years, we have been balancing, worried at different times about on one side ‘excessive growth’, or on the other; ‘low growth’. Now, central bankers fear ‘low growth’ most of all. That explains 2019’s biggest turnaround in financial markets: the U-turn in expectations for US interest rates as the expected rises of 2019 did not materialise and were replaced with two 0.25% cuts to rates, reducing them to a range of 1.75% to 2.0%. The median forecast is that rate cuts will remain at that level until the end of 2020,

Furthermore, the cost of money is falling across the globe, with the European Central Bank (ECB) even cutting its deposit rate to a record low of minus 0.5% and announcing the resumption of QE from 1 November 2019.

Equity markets initially responded with euphoria to the reversal in rate expectations, although there was some disappointment following the July cut when the Federal Reserve described it as a “mid-cycle adjustment to policy” rather than the beginning of a more aggressive cycle of monetary easing. Investors were incredibly nervous at the end of 2018, as markets fell about 20% from September 2018 highs to their lows on Christmas Day. Then markets started to rally, and now they are around or even above their previous highs.

The key question is ‘’will the falling cost of money succeed in supporting economic growth?’’ For now, the jury is still out. Consumption has held up well, especially in the US, as employment has held steady. On the other hand, investment spending and indicators of manufacturing activity have declined in recent months.

In the US and in Germany the most forward-looking indicator of business expectations is at levels not seen since 2009, which suggests a recovery is around the corner. Quite possibly, the weak manufacturing indicators result from uncertainty over the future terms of trade, or tariffs. Until the US-China trade talks reach a conclusion, it’s hard for manufacturers selling into the US to decide whether to have a manufacturing base in China, Thailand or, indeed, the US.

Brexit

The UK’s chaotic Brexit negotiations, with the chances of no deal remaining high ahead of the October 31, 2019 deadline for leaving the EU, compounds the uncertainty in the UK and Europe. The obvious response is for companies to delay any investments in production. This could well be what is behind the lower manufacturing indicators. One of the biggest difficulties in leaving the European Union without a deal is the potential disruption to supply chains. The loser is likely to be manufacturing in the UK, as the car manufacturers have stated it would close UK plants if Brexit rendered them unprofitable.

Therefore, if business sentiment and investment remain low for long enough, the inevitable result is lower employment, which triggers falls in consumption. This has not happened yet and therefore; will growth expectations decline to the degree that they trump low interest rates? If so, then equities look vulnerable at today’s levels. However, if interest rate reductions successfully support growth, then equities could still rise.

So much hinges on the trade talks. It is difficult to predict the respective strategies of President Trump and President Xi Jinping as they are both strong leaders. Since the talks broke down in May, they seem less likely to countenance the compromises needed to reach agreement, so challenging the resolution of their trade differences and even the continued progress of globalisation. Failure to strike a compromise over tariffs threatens to reduce global growth still further, and even stand in the way of globalisation.

Therefore, whilst it seems likely that global growth will remain slow, monetary easing has reduced the chances of recession. So as the risks of a protracted slowdown have risen, even with the prospect of lower rates, we should remain cautious about equity prices.

As always, we would encourage investors not to over-react. Share prices will fall and rise and it’s important not to be ‘out of the market’ at the wrong time as this can be costly to your overall capital values. We believe investors should remain focused on the medium to long term, investing over ‘time’, rather than trying to ‘time the market’. We will continue to work with you and manage your financial plan and provide the best potential to mitigate volatility by diversifying investments suitably across a broad range of asset classes that include equities, commercial property funds, fixed interest securities (bonds) and cash. We will always look to tailor your assets to your attitude to risk and capacity for loss, whilst considering what the impact the current stage in the economic cycle has on your exposure to various assets.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Economic & Market Update

Thu, 25 Jul 2019 16:40:18 +0000

Boris Johnson, now leader of the Conservative Party enters Downing Street as the leader of a divided country facing a constitutional crisis. He has to date played hard-ball with the EU, with a ‘do or die’ attitude in respect of the 31 October deadline. As that date approaches, given that he now has the job he has always desired, we will see how firm his resolve is.

On the one hand, his rhetoric and Europe’s determination not to abandon the Irish border agreement point towards a ‘No Deal’ exit. On the other, if everything plays out in parliament, a mechanism will be found to prevent a potentially economically damaging Brexit without an agreement.

The only way out of this impasse may be a general election to deliver the PM with a clear ‘No Deal’ mandate. But that would be a dramatic gamble for Mr Johnson. It would force him to risk losing the job he has long craved after a matter of weeks or months. Faced with that prospect, it is possible that we see a new compromising Boris Johnson.

The odds of a No Deal exit are rising but so too is the chance that the ‘can is kicked’ further down the road. Faced with the choice between embarrassment or leaving Downing Street, it may be likely the thick-skinned PM would dig in and seek a further extension.

Whilst this is speculation, for investors, it means continued uncertainty, at least until October and more than likely into next year. That is not great news for investors.

Sterling is likely to take an initial hit. With Boris Johnson heading into Downing Street, the pound has already started to weaken. Fundamentally, sterling looks to have dropped far enough, but sentiment could weaken further if the political crisis intensifies.

The other market in focus will be UK government bonds, (Gilts). This week, these were sold to investors at close to an all-time low yield, which implies high demand. However, the uncertainty is how long investors’ appetite for this asset class will last if Boris Johnson initiates higher fiscal spending (Tax Cuts) to boost a flagging economy.

The property market is already under pressure. Transactions are down from this time last year. Reduction in house prices are likely to spread from London into the rest of the country if Brexit remains unresolved.

With regards to Equities (the Stock Market), the FTSE 100 index is full of exporters and overseas earners. Therefore, the benefits of a weak exchange rate (Sterling) enables foreign profits and dividends from shares worth more, which is somewhat a ‘silver lining’ to a weak pound.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Economic and Market Update

Wed, 24 Apr 2019 07:16:13 +0000

Global Summary

Economists & Policymakers have cut 2019 global growth projections again. However, whilst there is no doubt an overall slowdown, it may well be that outright recession could possibly be avoided in the US and world economies. Consumer confidence and spending remains firm and we are seeing easing in US-China trade tensions, more flexible central banks and the benefits of lower oil prices, which will help to stabilise activity in 2019 and hopefully provide increased global growth in 2020.

Energy prices are lower and, whilst this is in part symptomatic of weaker global demand, it is helping to bring down inflation which is boosting real incomes worldwide. Monetary policy is easier. This is partly a reflection of lower inflation, but also because of a shift in US Fed policy making where they have become more responsive to financial market conditions and not increasing their interest rates as first thought.

The UK & Brexit

In the UK, Brexit continues to haunt the UK economy as companies complain of the negative impact on their business. The delay in the agreement of the Withdrawal Agreement has led to the downgrade of the UK GDP forecast for 2019. The next Bank of England (BOE) rate rise is therefore delayed allowing more time for the economy to rebound post-Brexit. The slowdown has been caused by a sharp rise in imports relative to exports, and weaker investment growth. Imports may be rising faster as firms have been warned to stockpile ahead of Brexit. A no-deal Brexit could cause trade disruption in the immediate aftermath, and so some stockpiling makes sense.

The Effect on your Investments

We conclude that there is likely to be a continued period of volatility in global markets. We must therefore look beyond the ‘daily noise’ and consider the underlying fundamentals of our own investments. It is difficult to remember that the market can help us maintain and sustain our wealth over the long term, when we witness the challenges across the world that we see today. There have and always will be significant uncertainties in the world – Russia, the Middle East, the EU, Africa, US domestic and international policy as well as our own political and economic agenda in the UK are always present. It could be said that ‘In times like these, it’s helpful to remember that there have always been times like these.’

The key with stock market volatility is not to over-react. Share prices will fall and rise and it’s important not to be ‘out of the market’ at the wrong time as this can be costly to your overall capital values. We believe investors should remain focused on the medium to long term, investing over ‘time’, rather than trying to ‘time the market’. Ongoing management of one’s financial plan and investments remains important and generally volatility can be partially mitigated by diversifying investments suitably across a broad range of asset classes that include equities, commercial property funds, fixed interest securities (bonds) and cash. We will always look to ensure that our clients investments reflect their requirements, tailoring them to their attitude to risk and capacity for loss, whilst considering what the impact the current stage in the economic cycle has on their exposure to various assets.

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

What are Cryptocurrencies?

Wed, 27 Feb 2019 17:45:40 +0000

We have all heard the terms, Bitcoin, blockchain and other types of cryptocurrencies, over the last 12 months or so, but what are they, how they work and should we as investors consider them as part of our portfolios.

Conventional currency

To understand what a cryptocurrency is, we first need to look at more conventional currencies, and then consider the differences.

If you look at a £10 note, written on the side that has the Queen’s head are the words, “I promise to pay the bearer on demand the sum of ten pounds”. This harks back to how cash as we understand it today, evolved. An individual would trade for goods with gold often being used as a commonly accepted payment.

Simplifying history somewhat, rather than carrying gold around all of the time, people would place it with someone who had sufficient means to keep it safe; an early form of bank. That “bank” would give the depositor a receipt confirming how much gold had been deposited.

These receipts had to be fairly durable, and difficult to forge. This enabled traders to pay for goods with receipts rather than bits of gold. The gold stayed in safe storage and people exchanged bits of paper instead.

It was a relatively short step from this to an official form of money governed by a central bank. The central bank would hold huge amounts of gold to act as collateral for the receipts/ cash that was flowing around in trade.

Over time, the “gold standard” as it was called, became obsolete as the central bank was able to print new money should it need to and everyone (in most countries) had sufficient trust in the currency for it to be widely accepted as a form of payment.

Jump forward in time a little further and the vast majority of money is not in paper cash form, but in numbers held on computers: salaries transferred, bills paid, and savings all held on electronic accounts with the understanding that the currency is backed by the central bank.

Central bank power

This puts central banks in a position of both great responsibility and great power. As well as controlling how much cash is printed, they act as the lender of last resort, i.e. the bank that lends to all the commercial banks.

The central bank in the UK, The Bank of England, can increase or reduce the interest it charges commercial banks in order to discourage or encourage borrowing and spending respectively. By working with government policymakers, the Bank of England can help to guide the country through economic ups and downs, as we have seen in the lowering of interest rates and electronic printing of money (i.e. “quantitative easing”) since the financial crisis 10 years ago.

The key point for an investor is that, as well as an economic guardian, the Bank of England also oversees the value of the pound.

Cryptocurrencies – outside of central bank control

Cryptocurrencies don’t have a central bank or an underlying asset. They are, in effect, just a number on a computer screen that, in theory, anyone can buy with dollars, pounds, euros or whatever.

If enough people want to buy them, then their value will rise, if not, it will fall. There is no central bank to step in and try to influence the cryptocurrency’s value.

This is also seen as one of the major advantages of a cryptocurrency: its value cannot be influenced or interfered with (depending on your perspective) by any national authority such as a central bank.

So who does control it?

From this point on, the article will address the points to Bitcoin as that is the best-known of the numerous cryptocurrencies.

Bitcoin is run as a peer-to-peer network that everyone can contribute to, but no one owns. Software programmers can download the coding that supports the exchange of Bitcoins and offer improvements. There are thousands of contributors these days, all of whom have fairly equal status in that they all hold the same software and contribute to the same network.

Think of it like the Internet; anyone can use it, but no one owns it outright. There are lots of different software types being used on the Internet, the most efficient and successful such as HTML or PERL are widely adopted because they work fairly well in delivering websites and services. But neither of them changes the basic structure or existence of the Internet itself, and both of them are “open source”, i.e. freely available to anyone to use as they wish without restriction.

Who created Bitcoin?

The person accredited with creating Bitcoin is referred to as Satoshi Nakamoto, though the veracity of that name and the person’s true identity are clouded in mystery. According to Bitcoin.org, Nakamoto came up with a Bitcoin specification and proof of concept in 2009, before “leaving the project in 2010 without revealing much about himself”. Since then, much as has been the case with Sir Tim Berners-Lee’s invention, the World Wide Web, countless developers have descended on Bitcoin to bring it to where it is today.

Blockchain security

This might lead one to question the security of such a system, but it is this very trait that affords cryptocurrencies such a relatively high level of security.

Imagine you have a shopping list held online. On its own, it’s vulnerable to hackers and other ne’er-do-wells. Such people might break through the security barriers and mess around with your shopping list.

To prevent this, you could have everyone in your family keep an online copy of the shopping list in completely different locations on the Internet. The different shopping lists can be compared against each other so that if a lorry-load of marzipan suddenly appears on one of the lists, then that is obviously a result of unwelcome interference. It is removed and the shopping lists all tally.

In short, it’s simple for a hacker to corrupt one or two versions of the shopping list, but the more copies of the shopping list there are, the harder it is to corrupt all of them consistently and thereby overcome the process in which the different shopping lists are compared and corrected.

With Bitcoin, the ledger of every transaction that has taken place is recorded and that record, the ledger, is duplicated thousands of times across Bitcoin users the world over, making it far more trouble than it’s worth for a hacker to try to corrupt. This ledger history and comparison system is referred to as “Blockchain”.

A user’s place in the network

Users get hold of Bitcoins by installing an application (i.e. computer programme) on their phones or computers, or by creating an account online. This application is called a “Wallet” for obvious reasons.

The wallets have been created by the computer programmers mentioned above. They are free to download and access.

A typical installation process takes a couple of minutes, requires an email address, password (measured for how difficult it would be for someone to guess) and a PIN code (i.e. four-digit identification number).

Once that’s done, the user can upload fiat money (pounds, dollars, euros etc.) to the wallet and use that to buy Bitcoins from another wallet owner whom they know has Bitcoins to sell, or through an exchange.

It takes an average of 10 minutes for the purchase (or sale) of Bitcoins to be confirmed as this allows time for various other copies of the Blockchain to confirm that they’ve recorded the transaction, making it difficult to reverse i.e. cheat the system.

What’s in it for the software providers?

To begin with, Bitcoins, after that, fees.

The system is set up so that the people who provide software services either in the form of wallets, exchanges or online storage, can earn the odd Bitcoin here and there once they’ve delivered a prescribed amount of service. This process is called mining (you can probably guess why).

As the system matures, and increasing numbers of “miners” contribute, it becomes more difficult to earn Bitcoins through this process. That’s deliberate as it offered a greater incentive to contribute when the system was embryonic and in need of software support.

The miners can, however, continue to earn fees by charging for their services, though competition is steep and that has helped to keep fees down to date.

In theory fees could be avoided altogether by users writing the software to create their own wallets, or by finding someone with whom they can trade and avoid most of the online services that the contributors provide. But that would mean being a computer software engineer and partaking in the equivalent of a private trade which might not be at as favourable a price as one that might have been achieved by using an exchange.

How many Bitcoins will be produced?

The maximum number will be 21 million, but with the current number in circulation close to 17 million, and the rate at which they are being added having slowed (as was intended from the original design), it is likely to be years before the maximum is reached.

Before then, Bitcoins can be divided down to 0.00000001 of a Bitcoin. At the time of writing, that equates to around one millionth of a US cent, in theory affording this cryptocurrency plenty of scope to deal with rising value.

But cryptocurrencies are not invulnerable

There is potential weakness in the exchanges where people deposit money and trade Bitcoins. Hackers have managed to break through the security systems of these exchanges and steal money or Bitcoins.

The most notorious instance was that of “Mt. Gox” from which $460m disappeared in 2014, sending the company into bankruptcy. While there was clearly some nefarious activity involved, the slapdash running of the company played a big part in its demise.

These exchanges have the equivalent assets and responsibilities of banks, so their security systems need to be just as robust. Mt. Gox was something of a wake-up call for cryptocurrency exchanges and has led to improved security.

Down the back of the sofa

However, the most common form of loss, according to bitcoin.org, is that of people losing or forgetting their wallet details. Once that happens, there is no way that anyone can spend or sell the Bitcoins that are in the given wallet, so they effectively drop out of circulation permanently.

Why is Bitcoin so highly valued?

Bitcoin’s original value was based on its inherent quality of being international and out of the reach of central banks. It created a currency by the people, of the people and that had been predicted in the 1997 book “The Sovereign Individual”, by William Rees-Mogg and James Dale Davidson.

This initial attraction was overtaken by momentum in 2017 as more and more people saw the stratospheric rise of Bitcoin’s equivalent value in dollars, leading to a rush of people buying Bitcoins in the hope of multiplying their assets.

To say that this was a high risk strategy is a colossal understatement. Previous sharp rises along similar lines have included the housing bubble of 2007, internet bubble of 2001, the stock market bubble of 1929, the Mississippi property bubble of 1721, and the Tulip bubble of 1637.

But there is at least one difference between most of those rises and that of Bitcoin: the cryptocurrency’s rise has been far quicker and steeper.

While it might be tempting to regret having missed out on the value created out of thin air for holding such an asset, a similar thought could be applied to not betting on the winner of the 4.30pm at Catterick.

Sure enough, the risks of buying such a stratospherically rising asset proved to be a high-risk strategy to say the least. The dollar value of Bitcoin plummeted by more than 50% in the early part of 2018.

What are the risks?

Putting aside the sharp fall in dollar value of Bitcoin, cryptocurrencies have a number of vulnerabilities.

Firstly, they are fairly embryonic at the moment, so sharp movements in value are bound to occur, both down as well as up.

What’s more, as China demonstrated in September 2017, a country could ban the use of cryptocurrencies. At the moment this is easier for autocracies to implement, but that could change if cryptocurrencies lead to tax avoidance or evasion.

Should this happen, then it would not take a great stretch of the imagination to conceive of leading economic nations getting together to restrict the use of cryptocurrencies.

One organic restriction that has already begun is that of competition. The other cryptocurrencies being developed include Ethereum, Ripple, Litecoin, Dash, NEM, Monero and Zcash. As with all developing offerings, some will blossom or specialise, others will merge or fail.

Conclusion

So cryptocurrencies are just forms of money that only exist on computers. In this way, they are like most of the money that everyone deals with on a daily basis.

They are not subject to government interference, but are not immune to it, and that poses a huge potential risk to valuations and integrity.

Some people will have done very well out of Bitcoin if they bought at the right point and sold similarly. But without intrinsic value or the ability to project future growth, cryptocurrencies have a long way to go before they feature in our investment considerations.

The financial crisis ought to remain fresh in investors’ minds. In his excellent book on what happened, “The Big Short”, Michael Lewis related the story of a fund manager visiting regions of the US to see if there was a housing bubble. On one occasion he met a pole dancer who had borrowed money to buy four houses and a condominium. She was able to do this because house prices were rising very quickly, hence she felt she could always refinance. She was wrong.

In a post on Bloomberg just before the price of Bitcoin slumped from $17,000 high, Macro Strategist Mark Cudmore told of a pole-dancing instructor who was “focusing more of her time informing people how to ‘invest’ in Bitcoin”. He went on to quote her breathtakingly naïve claim, “The good thing is when it goes down, you can buy some more, and you know it’s going to go up at some point”.

She would have done well to read “The Big Short”.

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Economic and Market Update

Fri, 11 Jan 2019 08:14:49 +0000

Current Situation

December was another volatile month for markets across the world which continue to be affected by the current global economic environment. As the Brexit talks move through their final stages, the UK market was especially volatile, with the perceived balance of possible outcomes ever changing and causing wider than normal fluctuation in performance.

The UK

Although the UK stock market has remained preoccupied by the ebbs and flows of the Brexit debate, the UK economy has continued to produce strong data. Towards the end of 2018, we have seen further positive numbers on wage growth and employment, backed up by more good news on inflation. With the lowest unemployment since the 1970s, strong growth in employment and hours worked, combined with the fastest real wage growth since the financial crisis, we enter 2019 with strong economic momentum in the UK.

Overseas

The rest of the world economy is looking less robust. China is visibly slowing, emerging economies continue to struggle with the strength of the US dollar, borrowing costs, and Europe has slowed significantly. This isn’t helped by the current weak oil price, with much weaker growth in demand growth than expected, as well as more robust growth in supply.

The US

The US economy is still visibly strong but the waning fiscal stimulus (tax cuts to incentivise public spending) and the effects of increasing interest rates, are combining to challenge policymakers and financial markets. Bond investors appear to be pricing in a much more challenging economic environment and the correction that appears to have started in the equity market is another warning of more troubling times ahead and possible recession

Conclusion

As we have previously discussed, the key with stock market volatility is not to over-react. Share prices will fall and rise and it’s important not to be ‘out of the market’ at the wrong time as this can be costly to your overall capital values.

We believe investors should remain focused on the medium to long term, investing over ‘time’, rather than trying to ‘time the market’. Ongoing management your financial plan and investments remains important and generally volatility can be partially mitigated by diversifying investments suitably across a broad range of asset classes that include equities, commercial property funds, fixed interest securities (bonds) and cash.

For clarification of any points discussed above and any future independent advice regarding your own financial planning, please do contact us on
01626 833225 or email advice4u@www.loughtons.co.uk

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Economic and Market Update

Fri, 07 Dec 2018 08:12:38 +0000

It has no doubt not escaped your attention that the political agenda both in the UK and in the US has at times been febrile of late. Much like the weather here in the UK, the political climate has also been stormy and inclement.

This has reflected in market volatility across all developed and emerging markets.

On Tuesday, with concerns around the inversion of the bond (fixed interest) yield curve, which usually points to a recession, the Dow Jones Industrial Average fell sharply.

It is true that markets hate uncertainty and with the lack of clear traction in the political agenda in the UK relating to Brexit and the increasing tensions between the US and China, which represent around 40% of the world’s GDP together with a slump in oil prices (Brent Crude) from US$85 per barrel in October to the lows of $60 per barrel now, this has provided the conditions for a perfect storm in markets.

US China Trade Tensions

One can observe that the increase in tariffs on Chinese goods by the Trump administration, with its protectionist ‘America First’ agenda, has in fact has increased the costs on those goods to American consumers, so in fact this policy has been counter-productive. China will not be bullied and has responded accordingly, resulting in increased tensions despite the handshakes and smiles published in the media recently. The market is not convinced and wants to see a genuine cessation of advancing measures by the Trump administration with this policy before it will breathe out.

End of the Bull Market?

For some time, it has been muted that we are at the end of the long bull market which grew out of the financial crisis of 2008. In fact, markets have simulated a smooth passage with significant returns being evident in the 10 or so years since the crisis broke.

Federal Reserve Monetary Policy

However, with the US generally calling the tune to which the rest of the developed world dances, the death of the bull market is in the hands of the US Federal Reserve (the Fed). Whilst there is much noise domestically regarding Brexit and internationally regarding trade tensions between the US and China, a significant concern is whether the Federal Reserve tightens monetary policy too quickly and by too much by raising interest rates.

How should one respond?

In the short term, markets rise and fall. In the long term markets have always risen. However, they do not rise in a linear manner and at times, one could be left reflecting on one’s decision to invest when markets are unsupportive.

In the short term, markets react and overreact to sentiment, both positive and negative. In the long term what drives market returns is the earnings from the underlying companies that one is exposed to, not the short-term sentiment in the media or daily markets.

For the disciplined investor however, this is indeed the time to hold one’s nerve. One must continue to tune-out the daily noise and look at the underlying fundamentals of our own investments. Quality will out.

As Warren Buffett observed, ‘The stock market is a device for transferring money from the impatient to the patient.’ Indeed, it is.

Within the last 20 years, a 20-year investment into FTSE All Share Index (the UK market average return) since the start of 1997 was 268% over the 5,216 trading days. If one were to miss the best 30 days during those 5216 trading days, the return to the investor would have been -8%. (Source Tavistock Wealth)

It is difficult to remember that the market is capable of helping us maintain and sustain our wealth over the long term, when we witness the challenges across the world that we see today.

In our experience it is impossible to predict the best time to invest or sell and one must remain invested in order to benefit from the rare but important positive days.

Often during market turmoil, we could possibly believe that the end is nigh! These emotions are not helpful in making logical investment decisions. There have and always will be significant uncertainties in the world – Russia, the Middle East, the EU, Africa, US domestic and international policy as well as our own political and economic agenda in the UK are always present. Can you remember a time when things were certain?

Paul Harvey the American radio broadcaster summed it up well ‘In times like these, it’s helpful to remember that there have always been times like these.’

Conclusion

We believe investors should remain focused on the medium to long term, investing over ‘time’, rather than trying to ‘time the market’. Ongoing management of one’s financial plan and investments remains important and generally volatility can be partially mitigated by diversifying investments suitably across a broad range of asset classes that include equities, commercial property funds, fixed interest securities (bonds) and cash.

If you are unsure, you should obtain Independent Financial Advice.

May we wish all readers a Happy Christmas and a peaceful and united 2019.

For clarification of any points discussed above and any future independent advice regarding your own financial planning, please do contact us on
01626 833225 or email advice4u@www.loughtons.co.uk

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Autumn Budget 2018

Tue, 30 Oct 2018 07:11:36 +0000

With no significant tax or pension changes in yesterday’s Budget, the key financial planning points are:

Income tax

The personal allowance and higher rate threshold will increase earlier than expected to £12,500 and £50,000 respectively from April 2019. The income tax rates and bands for Scottish taxpayers will be announced in Scottish Budget on 12 December.
There are no other changes to income tax bands or allowances.

Pensions

The pension lifetime allowance (LTA) will rise to £1,055,000 from April 2019.
Reassuringly, there are no changes to pension annual allowances (AA). The standard AA remains at £40,000, the money purchase AA stays at £4,000 (with no carry forward) and there are no changes to the high income AA taper rules.

Capital gains tax

The capital gains tax allowance will increase by £300 to £12,000 from April 2019.

Inheritance tax (IHT)

As expected, the IHT nil rate band will remain frozen at £325,000 until April 2021.
The residence nil rate band will increase from £125,000 to £150,000 from April 2019, allowing some couples to leave up to £950,000 to future generations free of IHT.

Trust taxation

There will be a consultation to consider the simplification and fairness of trust taxation.
The existing IHT regime for trusts is notoriously complex and any attempt to simplify it is extremely welcome. Removing the complexity of trust tax charges would allow advisers to concentrate on the benefits a trust can offer their clients to control their affairs, without them being fearful of charges they don’t fully understand.

ISAs

Annual ISA limits stay at £20,000 per person, with no reduction in the range of ISA options available to meet different needs.

Help to Buy

The government has extended the Help to Buy home ownership scheme to 2023. The original scheme was due to end in 2021. The scheme enables homebuyers to purchase newly built homes with deposits of only 5 per cent.

If you wish to take a step in the right direction with planning your finances, please feel to call us on 01626 833225 or email us to find out more or to arrange an initial complimentary meeting.

Important Information
Please note that the above article does not constitute financial advice.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Market Update and current Stockmarket Volatility

Fri, 19 Oct 2018 09:21:42 +0000

You will have seen a reduction in global stock markets of late back to where they were at the start of 2018 – why is this happening now?

Interest Rates

Rising Interest rates in the US is causing bond yields to rise which makes them more attractive for investors looking for income. Consequently, this has a dampening effect on Equities as they are not the only place to invest in, as it was when Bond and Cash yields were low. These alternative investments are traditionally less volatile and adds a measure of diversity to an investor’s portfolio and are now becoming more attractive.

Rising interest rates increase the ‘cost of borrowing’ for consumers and businesses. This reduces spending which influences a company’s profitability and the economy generally. This is quite ironic as rising interest rates is generally a sign an economy is growing. So, this could be a good sign longer term but via the short term the markets are curtailed via investor sentiment.

Trade Wars

Other issues affecting the markets at present are the continuing trade wars and President Trump looking to ‘Put America First’ at all costs. This is creating worries about the global growth outlook and has had a detrimental effect on Emerging Market economies during 2018.

Earnings Growth

These issues are not new and have been somewhat masked by the positive economic growth achieved in the US. Earnings drive up share process and because of Trump’s tax cuts the ‘earnings per share’ has been rising. It is quite likely that the earning growth in the US is not sustainable and there could be monetary issues in the next 2/3 years and as investors look forward into 2019 they are becoming more pessimistic.

UK and Brexit

In the UK it is looking more and more likely that the Brexit negotiations will conclude with a relatively “soft” Brexit. But, as current media headlines show, there are still several compromises that need to be made on both sides to seal the deal.

If the outcome is a relatively soft Brexit, there are likely to be significant implications for the UK economy and markets going into 2019 / 2020. It is likely that sterling will rise, which would bring down UK inflation and help lift consumer and business spending.

We may then see a different expectation for UK interest rates. Before the referendum in 2016, the Bank of England (BoE) was expected to be the first central bank to start increasing interest rates back to a more “normal” position. This was due to unemployment being low and the economic recovery well underway.

Post Brexit, unemployment is now lower and therefore it would seem likely that the BoE would need to raise interest rates at a faster pace than the 0.25% per year that is currently priced.

Conclusion

However, we believe investors should remain focused on the medium to long term, investing over ‘time’, rather than trying to ‘time the market’. Active management remains important and generally volatility can be partially mitigated by diversifying investments across a broad range of asset classes that include equities, commercial property, fixed interest securities (bonds) and cash to spread risk even further. We will always look to ensure that you have investment portfolios that reflect your requirements, tailoring them to your attitude to risk and capacity for loss, whilst considering what the impact the current stage in the economic cycle has on your exposure to various assets.

Have you visited our website recently? Click the link to see our recent changes and to subscribe to our regular updates www.loughtons.co.uk

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Economic and Market Update

Thu, 16 Aug 2018 12:35:04 +0000

The Dangers of Brexit

Given the unprecedented nature of Brexit, many investors are becoming cautious in their approach, which possibly means they may be inclined to invest elsewhere, which is no doubt influenced by the noise of daily politics.

Yet, the truth is that the Brexit uncertainty is well recognised, so while people are confused on how to

price it, we have reason to believe it is a fear-driven response. Here are the typical risks that are driving such fears:

What people are seemingly scared of?

A lack of confidence in the U.K. economy could result in capital outflows and reduced investment.

The labour force could fall due to a European exodus, where household consumption could decline, lowering domestic revenues.
Exports to Europe could be hampered by higher tariffs, and imports could become more expensive due to a cheaper pound sterling.

However, a lot of analysts are considering the downside risk Brexit could have by looking at company’s profit margins?

Profit margins could reduce on the back of reduced sales and higher import costs.
Dividends could become unsustainable at current high levels.
Stocks may then be de-rated, which could increase the cost of an equity.

While nothing is certain, there is sufficient reason to believe that a prolonged downturn in the stock-market is unlikely. However, a short-term downturn is possible following Brexit. Furthermore, certain analysts think that the impact of a temporary but possibly severe impairment to fundamentals would still offer sufficient return for risk with a positive net outcome under most scenarios. This is especially true for the U.K. Companies, as they would benefit from positive currency fluctuations.

How likely are trade wars?

Some investors seem spooked by the recently announced tariffs and the possibility that all of this may lead to an ugly trade war. The subject has clearly grabbed attention and headlines as the Trump administration began an effort to renegotiate terms with its trade partners. Retaliatory measures from all sides raised the probability of an extended conflict that may hamper global economic growth.

It is unlikely that the announced tariffs currently present a major threat to global economies. The U.S. economy, in particular, is large enough and domestically oriented enough to not feel too much pain from current measures.

Of course, trade tensions and tariffs could become more severe and, at worst, tip the global economy toward a recession. But getting too focused on a worst-case scenario ignores the possibility that tensions cool, compromise is reached, and investors go back to focusing on strong earnings. It wasn’t too long ago that presumed nuclear conflict on the Korean peninsula sent tremors through global markets, but that seems to have been laid to rest for now.

Should Investors React?

The short answer: no. It would be prudent for longer term investors to focus on long-term valuations (the true and durable value of an asset class), rather than its market price. Having a long-term perspective makes the short-term outcomes surrounding the current trade issues less concerning.

Investors who trade on emotion and market reactions are more likely to sell when markets are low and buy when they’re high. We advise our clients to do the opposite by sticking to your principled approach to investing, which is designed to keep you rational in a sometimes-irrational world.

Remaining in your Investments?

The best thing an investor can do when contemplating change is to reflect on their goals. Would any investment change align with your original investment plan or strategy in respect of your agreed goals?

The key question to ask is whether anything has fundamentally changed since setting the original strategy or whether it’s just that you are disappointed with the progress towards your goals.

If something has fundamentally changed, the next question to ask is whether you can clearly identify what has changed. Write it down, then balance this by writing what it might mean if you’re wrong. This should include any misjudgment risk as well as the added costs if you decided to change investments. You will often find that the change you desire is not necessarily going to increase the probability of reaching your goals.
If it has “just” disappointed you, but nothing has fundamentally changed, the likely best option is to remain as you are. By remembering that investment markets never move in straight lines, you may avoid the perils of trying to time the market.

It is helpful when investing to remember the time-tested adage ‘Time in the market, rather than timing the market.’

It would also be helpful to remember your original objectives and reasons for investing before making any impulsive decisions that could potentially undermine these in the future.

Our Approach

We believe investors should remain focused on the medium to long term, investing over ‘time’, rather than trying to ‘time the market’.

We continue to assess the quality of any investment opportunities which come about as the result of our investment process and strict fund selection criteria. A long-term outlook when investing is clearly desirable, as short-term expectations can turn out to be unrealistic where events cannot be anticipated.

Active management remains important and generally volatility can be partially mitigated by diversifying investments across a broad range of asset classes that include equities, commercial property, fixed interest securities (bonds) and cash to spread risk even further.

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Bank of England Increases Base Rate to 0.75%

Thu, 02 Aug 2018 20:47:17 +0000

Today the base rate rose to its highest level since the financial crisis 10 years ago, with the Bank of England increasing it to 0.75%. All 9 members of the Monetary Policy Committee (MPC), chaired by Mark Carney, voted to raise the rate.

This was widely expected by both the market and commentators, given that the economic data published, for the second quarter of 2018 showed marked improvement on the first quarter.

In fact, it does bring into question when the MPC will consider the next one, given its previous comments on following a slow and steady path to future increases. However, it will continue to assess the underlying economic data going forward and the timing of such a hike will be dependent on this.

Some feel that an increase in interest rates is an unnecessary risk, given that while economic growth has picked up since the start of the year, it remains at a low level by historic standards.

The fall in unemployment has not led to higher inflation as might have been expected which would have possibly required an increase in interest rates in line with traditional ‘monetary policy’.

However, if inflation is above target but rates are low, this encourages excessive borrowing in the economy, which, possibly leads to a deeper financial crisis than that which occurs if rates are put up earlier and results in slower economic growth.

If markets think this is the first of a series of rate increases, then sterling should strengthen as more international money backs the pound.

This would possibly result in the FTSE 100 falling as it tends to flourish under a weaker pound.

As interest rates increase, bond yields would start to rise, which means capital values will fall. Again, this is good news if you are looking at allocating new money to bonds as your income should be higher. However, it could be bad news for many existing bond investors.

Also, it is worth considering ‘discount rates’ which is a mathematical equation that many in the city use to value companies. Basically, they look at the ‘risk-free’ rate of return, i.e. base rates or Gilts for example, and use it to help value a company. The lower the risk-free rate the higher value can be apportioned to a company.

So, if the risk-free rate rises, the potential value of a company falls. This is where the long-term view of rates is important and if the market thinks rates are going to increase a lot higher, share prices can start to fall.

Investment markets had already largely ‘priced in’ (accounted for) the rate rise (in stock prices), so the immediate reaction from markets was muted.

The biggest challenge facing our domestic market is Brexit. Markets don’t like uncertainty and indeed this has been reflected in noises from the business community in recent weeks, with some high-profile businesses voicing their opinions to our political leaders.

As the economy and markets adjust, it is expected that future rate rises will be gradual and limited.

Our Approach

As we have previously confirmed, we believe investors should remain focused on the medium to long term, investing over ‘time’, rather than trying to ‘time the market’.

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Market Update

Thu, 08 Feb 2018 11:33:11 +0000

Stock-Market Volatility – February 2018

After a lengthy stretch of calm, stock market volatility has returned this week. On Monday, the Dow Jones index fell 1,175 points, the single largest one-day drop in history. This has affected the UK stock-markets also. The FTSE 100 has dropped over the last week, with six consecutive days of falls. The index at the close of business on Tuesday 6^th was down around 8% from its mid-January all-time high.
When markets are falling like this, it can be scary. Especially if you’re new to investing. The media doesn’t help. Newspapers and websites tend to dramatize any volatility, stating that £Xbn has been wiped off the market and that investors will suffer.

What is the best strategy to deal with Stock-market volatility?

Stay calm

The first thing to do when stocks are falling is to stay calm and rational. Remember that markets rise and fall. They always have, and they always will. It’s part of investing.
Put a downturn in the markets into perspective. For example, over the last two years, the FTSE 100 has risen over 20%. Add in dividends and investors have enjoyed a near 30% return. So falls of approximately 8% earlier this week are not the end of the world.

Ask why

It is also worth establishing why markets are falling. This can help us to remain rational.
The main driver of the volatility at present, in an ironic twist, is that economic news from the US has been stronger than anticipated. As a result, the market is expecting multiple US interest rate increases this year. That doesn’t seem like the end of the world.

Welcome the volatility

Warren Buffett said, “Be fearful when others are greedy and greedy when others are fearful,”
Many investors do not like volatility. They do not like when stocks fall, and sell up, often locking-in losses.
But corrections bring a means of enhancing your investments over the longer term. When stocks fall sharply, you have the opportunity to buy high-quality companies at lower valuations. That means potentially higher profits for you in the future. Similarly, if you’re a dividend investor, falling share prices bring opportunities to pick up higher yields. That means larger dividends for you in the future.
That way volatility isn’t so scary, but more of an opportunity.

The Service we provide for our clients

As we have previously confirmed, we believe investors should remain focussed on the medium to long term, investing over ‘time’, rather than trying to ‘time the market’.
We continue to assess the quality of any investment opportunities which come about as the result of our investment process and strict fund selection criteria. A long-term outlook when investing is clearly desirable, as short-term expectations can turn out to be unrealistic where events cannot be anticipated.
Therefore, active management remains important and generally volatility can be partially mitigated by diversifying investments across a broad range of asset classes that include equities, commercial property, fixed interest securities (bonds) and cash to spread risk even further.

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Economic and Market Update

Mon, 15 Jan 2018 09:44:57 +0000

As we enter 2018 it is conceivable that the world’s leading economies will continue to display strength and resilience. The US economy is strong and the eurozone economies are improving along with an increase in global trade. This improvement among developed economies should also have a positive impact on the manufacturing economies of East Asia as well as commodity producers in other emerging nations as their goods are exported to these developed nations.

Some economic points to consider below:

United States

A 16 year low in unemployment at 4.2% in September 2017.
Low inflation. A key moment will come in the spring of 2018, when 2017’s price declines will fall out of the 12-month (year-on-year) comparison.
The underlying problem is possibly slow growth of money and credit.
However, this should not pose a problem provided that core inflation starts to pick up again in 2018. This in turn will underpin moderate real GDP growth in 2018.
There is good reason to expect the current expansion in the US has further to go and could actually become the longest business cycle expansion in US financial history.
The only real threat to this prospect is the possibility that the Fed and other central banks could make a mistake and restrict credit and raise interest rates too much during monetary policy normalisation. This could cause a slowdown in 2018-2019.

Eurozone

Economic activity in the eurozone is at last expanding at a momentum close to its potential.
To sustain economic momentum, commercial banks need to create credit more rapidly than at present. Otherwise, when the ECB starts to taper its quantitative easing, credit growth could weaken substantially.
Even though the economies of the single currency area may have recovered, the basis for sustained growth is fragile. The risk, therefore, is that tapering quantitative easing purchases will lead to a renewed and damaging slowdown in monetary growth, resulting in the inflation rate declining further beneath its target of 2%.

United Kingdom

UK economic growth picked up a little in the third quarter of 2017 after a sluggish first half, but still remains below its recent trend. However, the British economy is likely to remain positive over the next 12 months by increased elements of consumer and business spending.
The Bank of England has managed liquidity to create economic growth and the weaker pound has enabled the manufacturing export sector to be higher than expected.
Unemployment is low as the economy continues to generate good job growth.
However, with money and credit expansion accelerating, locally generated inflation could be added to rising import prices. Therefore, it is likely that growth in the UK will remain relatively low until the uncertainties of the Brexit negotiations are overcome.

Japan

The Japanese economy has had a decent run lately with real GDP increasing for six consecutive quarters. This is the first such extended stretch of growth for over a decade.
Whilst unemployment remains low it is expected that low wage growth will continue.
Despite huge quantitative easing by the Bank of Japan, inflation is likely to stay weak and below the central bank’s 2% target, but should stay above zero.
Economic growth for 2018 should remain stable but lag behind the US and eurozone.

China and Emerging Asia

Both China and emerging Asia are likely to benefit from a modest increase in global trade. This is unlikely to be enough though to become a commodity boom in 2018.
China is the largest emerging market and the biggest buyer of commodities on world markets. The growth of China’s imports is important to numerous developed and emerging commodity exporters around the world.
If China can undergo a steady domestic recovery over the next year or two, the outlook for those commodity-exporting economies will improve considerably.

The Effect on Global Stock Markets

If inflation remains low, monetary policy can remain looser (the actions of the central banks to control the flow of money in the economy) and interest rates may not need to rise too much. This would mean that recession is less likely, and a ‘bear’ market therefore would not be imminent.
We could therefore see a period of low returns rather than a downturn in markets. However, if inflation does rise further causing higher interest rates, it is very likely that we will experience a bear market and a correction / downturn in the stock-markets.

The Service we provide for our clients

As always, we believe investors should remain focussed on the medium to long term, investing over ‘time’, rather than trying to ‘time the market’.
Through our research at Loughtons, supported by the expertise of Morningstar, we focus on the intrinsic value of a particular asset. We continue to assess the quality of any investment opportunities which come about as the result of our investment process and strict fund selection criteria. A long-term outlook when investing is clearly desirable, as short-term expectations can turn out to be unrealistic where events cannot be anticipated.
Therefore, active management remains important and generally volatility can be partially mitigated by diversifying investments across a broad range of asset classes that include equities, commercial property, fixed interest securities (bonds) and cash to spread risk even further.
We will always look to ensure that clients have a portfolio that reflects their requirements which is based on their attitude to risk and capacity for loss, whilst considering what the impact the current stage in the economic cycle has on the exposure to various assets.

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Autumn Budget 2017

Wed, 22 Nov 2017 16:56:35 +0000

As expected with Brexit looming, Philip Hammond delivered a fairly non-descript Budget with only one or two small surprises. The highlights relevant to our clients are detailed below.

Pensions

Lifetime allowance for pensions – the Budget papers confirmed that the lifetime allowance for pension savings will increase in line with CPI, rising to £1,030,000 for 2018/19.

State Pension and Pension Credit – the basic State Pension will be increased by the triple lock. The rise in April 2018 will be 3%, a cash increase of £3.65 per week for the full basic State Pension. The benefits of the triple lock uprating will also be passed on to the poorest pensioners through an increase to the Standard Minimum Guarantee in Pension Credit to match the cash rise in the basic State Pension. This will be paid for through an increase in the Savings Credit threshold – the Savings Credit starting point. The full new State Pension will also be increased by the triple lock, rising by £4.80 per week.

Stamp duty land tax
Stamp duty has been abolished on homes under £300,000 for first-time buyers and they will not pay stamp duty on the first £300,000 for homes worth between £300,000 and £500,000. They will pay the normal rates of stamp duty on the price above that. This will save £1,660‎ on the average first-time buyer property. This change is effective from 22nd November 2017.

The Office for Budget Responsibility has said that the stamp duty cut will push house prices up. It says it expects this policy to increase prices by 0.3% with most of this effect occurring in 2018.

Stamp Duty Land Tax – The government will amend SDLT higher rates for additional properties with immediate effect. The changes will benefit those increasing their share of their own home, families affected by a divorce court order, and cases where properties are held in trust for children subject to Court of Protection orders. The government will also remove a potential opportunity for avoidance.

National Living Wage and the National Minimum Wage
The National Living Wage for those aged 25 and over will increase from £7.50 per hour to £7.83 per hour from April 2018.

Universal Credit
Households who qualify for Universal Credit will be able to access a month’s worth of support within five days, via an interest-free advance, from January 2018. This can be repaid over 12 months.

Claimants will be eligible for Universal Credit from the day they apply, rather than after seven days. Housing Benefit will continue to be paid for two weeks after a Universal Credit claim.

Income tax and National Insurance
Personal allowance (PA) and higher rate threshold (HRT) – The government is committed to raising the PA to £12,500 and the HRT to £50,000 by 2020 The Budget announces that in 2018/19 the PA and HRT will increase to £11,850 and £46,350 respectively.

Marriage Allowance: allowing claims on behalf of deceased partners – The Marriage Allowance allows taxpayers to transfer up to 10% of their unused PA to their partner, reducing their tax bill by up to £230 a year in 2017/18. The government will now allow claims in cases where a partner has died before the claim was made. These claims will be able to be backdated by up to 4 years.

Starting rate for savings – The band of savings income that is subject to the 0% starting rate will be kept at its current level of £5,000 for 2018/19.

Off-payroll working in the private sector – The government reformed the off-payroll working rules (known as IR35) for engagements in the public sector in April 2017. Early indications are that public sector compliance is increasing as a result, and therefore a possible next step would be to extend the reforms to the private sector, to ensure individuals who effectively work as employees are taxed as employees even if they choose to structure their work through a company. The government will consult on how to tackle non-compliance in the private sector.

Employment status discussion paper – The government will publish a discussion paper as part of the response to Matthew Taylor’s review of employment practices in the modern economy, exploring the case and options for longer-term reform to make the employment status tests for both employment rights and tax clearer. The government recognises that this is an important and complex issue, and so will work with stakeholders to ensure that any potential changes are considered carefully.

Taxation of trusts – The government will publish a consultation in 2018 on how to make the taxation of trusts simpler, fairer, and more transparent.

National Insurance Contributions (NICs) Bill – As previously announced, the government will delay implementing a series of NICs policies by one year. These are the abolition of Class 2 NICs, reforms to the NICs treatment of termination payments, and changes to the NICs treatment of sporting testimonials.

Rent-a-room relief – The government will publish a call for evidence to establish how rent-a-room relief is used and ensure it is better targeted at longer-term lettings.

Benefits in kind: electric vehicles – From April 2018, there will be no benefit in kind charge on electricity that employers provide to charge employees’ electric vehicles.

Taxation of employee business expenses – Following the call for evidence published in March 2017, the government will make several changes to the taxation of employee expenses:

Self-funded training – The government will consult in 2018 on extending the scope of tax relief currently available to employees and the self-employed for work-related training costs.
Subsistence benchmark scale rates – To reduce the burden on employers, from April 2019 they will no longer be required to check receipts when reimbursing employees for subsistence using benchmark scale rates. The existing concessionary accommodation and subsistence overseas scale rates will be placed on a statutory basis, to provide greater certainty for businesses.
Guidance and claims process for employee expenses – HMRC will work with external stakeholders to improve the guidance on employee expenses, particularly on travel and subsistence and the process for claiming tax relief on non-reimbursed employment expenses.

Armed Forces personnel accommodation – An income tax and NICs exemption will be introduced for certain allowances paid to Armed Forces personnel for renting or maintaining accommodation in the UK private market. This will support the Ministry of Defence’s aim to provide a more flexible, attractive and better value-for-money approach to accommodation.

Seafarers’ Earnings Deduction and the Royal Fleet Auxiliary – Seafarers are entitled to an income tax deduction of their foreign earnings in certain circumstances. The existing extra-statutory treatment of the Royal Fleet Auxiliary will be placed on a statutory basis.

Qualifying Care Relief (QCR) and self-funded Shared Lives payments – QCR is a tax simplification covering expenses incurred when providing care that means carers only need to keep simple records. The government will extend the scope of QCR to cover self-funded Shared Lives care payments, to encourage the use of Shared Lives care.

Class 4 National Insurance contributions – As previously announced, the government will no longer proceed with an increase to the main rate of Class 4 NICs from 9% to 10% in April 2018, and to 11% in April 2019.

Capital Gains Tax
Capital Gains Tax (CGT) payment window – The introduction of the 30-day payment window between a capital gain arising on a residential property and payment will be deferred until April 2020.

Taxing gains made by non-residents on immovable property – To align the UK with other countries and remove an advantage which non-residents have over UK residents, all gains on non-resident disposals of UK property will be brought within the scope of UK tax. This will apply to gains accrued on or after April 2019. The government intends to include targeted exemptions for institutional investors such as pension funds.

Investments
Individual Savings Account (ISA) annual subscription limits – The ISA annual subscription limit for 2018/19 will remain unchanged at £20,000. The annual subscription limit for Junior ISAs and Child Trust Funds for 2018/19 will be uprated in line with CPI to £4,260.

Save As You Earn scheme – Employees on maternity and parental leave will be able to take up to a 12 month pause from saving into their Save As You Earn employee share scheme, increased from 6 months currently. The change will take effect from 6 April 2018.

Life assurance and overseas pension schemes – From April 2019, tax relief for employer premiums paid into life assurance products or certain overseas pension schemes will be modernised to cover policies when an employee nominates an individual or registered charity to be their beneficiary.

The Budget announces an action plan to unlock over £20 billion of patient capital investment to finance growth in innovative firms over 10 years by:

establishing a new £2.5 billion Investment Fund incubated in the British Business Bank with the intention to float or sell once it has established a track record. By co-investing with the private sector, a total of £7.5 billion of investment will be unlocked
doubling the annual allowance for people investing in knowledge-intensive companies through the Enterprise Investment Scheme (EIS) and the annual investment those companies can receive through EIS and the Venture Capital Trust scheme, and introducing a new test to reduce the scope for and redirect low-risk investment, together unlocking over £7 billion of growth investment
investing in a series of private sector fund of funds of scale. The British Business Bank will seed the first wave of investment with up to £500 million, unlocking double its investment in private capital. Up to three waves will be launched, supporting a total of up to £4 billion investment
backing new and emerging fund managers through the British Business Bank’s established Enterprise Capital Fund programme, unlocking at least £1.5 billion of new investment
backing overseas investment in UK venture capital through the Department for International Trade, expected to unlock £1 billion of investment

The government will also support long-term investment by:

giving pension funds confidence that they can invest in assets supporting innovative firms as part of a diverse portfolio. The Pensions Regulator will clarify guidance on investments with long-term investment horizons. With over £2 trillion in UK pension funds, small changes in investment have the potential to transform the supply of capital to innovative firms
changing the qualifying rules in Entrepreneurs’ Relief to remove the disincentive to accept external investment and consulting on the detailed implementation of that change
launching a National Security Strategic Investment Fund to invest in advanced technologies to contribute to the national security mission. The British Business Bank will also support developing clusters of business angels outside London through a new commercial investment programme

Corporate tax
Corporate indexation allowance – To bring the UK in line with other major economies and broaden the tax base through removing relief for inflation that is not available elsewhere in the tax system, the corporate indexation allowance will be frozen from 1 January 2018. Accordingly, no relief will be available for inflation accruing after this date in calculating chargeable gains made by companies.

Changing how non-resident companies’ UK property income and certain gains are taxed – From April 2020, income that non-resident companies receive from UK property will be chargeable to corporation tax rather than income tax. Also from that date, gains that arise to non-resident companies on the disposal of UK property will be charged to corporation tax rather than CGT.

VAT
VAT registration threshold – In response to the Office of Tax Simplification’s report Value Added Tax: Routes to Simplification, the government will consult on the design of the threshold, and in the meantime will maintain it at the current level of £85,000 for two years from April 2018.

Tax evasion and the hidden economy
Requirement to notify HMRC of offshore structures – The government will publish a consultation response on the proposed requirement for designers of certain offshore structures that could be misused to evade taxes, to notify HMRC of these structures and the clients using them. This work will be taken forward in conjunction with the OECD and EU.

Extending offshore time limits – Assessment time limits for non-deliberate offshore tax non-compliance will be extended so that HMRC can always assess at least 12 years of back taxes without needing to establish deliberate non-compliance, following a consultation in spring 2018.

Tax avoidance
NICs Employment Allowance – The government has found evidence of some employers abusing the Employment Allowance to avoid paying the correct amount of NICs, often by using offshore arrangements. To crack down on this, HMRC will require upfront security from employers with a history of avoiding paying NICs in this way. This will take effect from 2018 and raise up to £15 million a year.

Disguised remuneration – The government will tackle disguised remuneration avoidance schemes used by close companies – companies with five or fewer participators – by introducing the close companies’ gateway, revised following consultation, and measures to ensure liabilities from the new loan charge are collected from the appropriate person.

Tax administration and compliance
Making Tax Digital (MTD) – As announced in July and legislated for in the Finance (No. 2) Act 2017, no business will be mandated to use MTD until April 2019. Only those with turnover above the VAT threshold will be mandated at that point, and then only for VAT obligations. The scope of MTD will not be widened before the system has been shown to work well, and not before April 2020 at the earliest.

Late Submission Penalties and Late Payment Interest – The government will reform the penalty system for late or missing tax returns, adopting a new points-based approach. It will also consult on whether to simplify and harmonise penalties and interest due on late payments and repayments. This will ensure that the system is fair, simple and effective across different taxes. Final decisions on both measures will be taken following this latter consultation.

Faster recovery of Self-Assessment debt – HMRC will use new technology to recover additional Self-Assessment debts in closer to real-time by adjusting the tax codes of individuals with Pay As You Earn (PAYE) income. These changes will take effect from 6 April 2019.

Modern banking services
The Budget sets out further actions which will enable innovation in banking services, strengthen challenger banks, and improve access to affordable credit for consumers.

Open Banking – the Open Banking project will, from early next year, make it easier for customers to access innovative products and services that better suit their needs. The government has now secured the commitment of the largest banks to extend Open Banking to more payment products, including credit cards. The second phase of the Nesta Open-Up Challenge will also award £2.5 million to firms to develop innovative Open Banking apps to support greater customer choice and flexibility
Support for challenger banks – as agreed with the European Commission in September 2017, RBS will fund and deliver a £775 million package of measures designed to improve competition in the UK business banking market. The Prudential Regulation Authority will also make capital requirements more proportionate for eligible smaller banks, helping them compete more effectively in the market
Post Office banking services – the government will ask Post Office Limited and UK Finance to raise public awareness of the banking services available at the Post Office, both for personal customers and Small and Medium Enterprises (SMEs)
Credit Unions – to improve access to reputable sources of credit, the government will increase the number of potential members that a credit union serving a local area is able to have from 2 to 3 million

Important Information
Please note that the above article does not constitute financial advice.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Job Vacancy – Part-Time Receptionist / Admin Support / Office Administration

Wed, 15 Nov 2017 13:55:44 +0000

Part-Time Receptionist / Admin Support / Office Administration

Bovey Tracey
Pay dependent upon hours, initially 12 hours plus per week
Permanent

Job Role:

Working within a growing financial planning practice with a Building Society agency, we are seeking a part time administrator / receptionist. You will join an established close-knit team delivering specialist financial planning services to clients.

We seek someone who is highly organised, highly motivated and has excellent communication skills.

Main Duties & Responsibilities:

Answering and directing incoming calls
Greeting visitors and directing them accordingly
Office duties such as scanning, computer work and policy administration.
Assisting with running the Building Society agency to meet and greet existing customers and account opening for new customers.

Personal Requirements:

Experience of working in financial services preferable but not essential.
An outgoing and positive approach to work.
Organisation skills are key for this role.
A good working knowledge and understanding of using all Microsoft Office programs.
Ability to work within a team as well as on your own.
The ability to prioritise work tasks and manage deadlines.

About the Company:

We have been trading for over 20 years and are currently expanding. Please refer to our website www.loughtons.co.uk for further details about the company.

To apply, please send a copy of your CV along with details as to why you feel you are suitable for this role, to:

The Finance Director

Loughtons IFA

Town Hall House

Bovey Tracey

Devon

TQ13 9EQ

Alternatively, please email your CV to advice4u@www.loughtons.co.uk

Applications close by 5 pm on 12^th December 2017.

Economic and Market update

Sat, 11 Nov 2017 17:08:20 +0000

A question on people’s minds at the moment is ‘Are we about to experience a stock market downturn?’ given the length of time we have been in a ‘bull market’ and also in light of the uncertainty regarding Brexit etc. Here we discuss the key findings within our domestic and the international economies and what this could mean for investors.

There has been an interesting interplay recently between inflation, wages, interest rates and sterling. Inflation has been edging higher since deflation was a threat in 2015. Therefore, the combination of rising inflation and weak earnings growth means that we are feeling the squeeze at present.
The recent rise in sterling indicated that the markets feel that ‘rock bottom’ interest rates are coming to an end. However, with inflation rising and the ‘real’ value of money reducing, it is likely that we will remain in a ‘low interest rate’ environment for some time

Europe & the Rest of the World

2017 has delivered a sequence of reassuring election results in Europe. France, Holland and more recently in Germany, which have steered clear of ‘right wing’ extremism.
Geo-politics remains unstable however, where the standoff between American and North Korea shows no signs of abating.
In these times investors often look for a safe haven and ‘Gold’ has seen a rise during 2017.

The Markets – what can we expect

We are more than 8 years into a ‘bull market’ and it is reasonable to think that we may be near the ‘top’. Share prices have been rising without any meaningful correction for longer than some other bull markets in the past.
If we enter a ‘bear market’ (downturn in the market) what does this mean?
First, there are cyclical bear markets which are caused by rising interest rates, impending recessions and falls in profits.
Secondly, there are structural bear markets which are caused by imbalances and bubbles and often come before times of deflation.
Thirdly, there are event driven bear markets which are triggered by outside influences such as wars, oil price shocks and emerging market crises.
So, whilst a correction (bear market) may be around the corner, it may not be all that bad. We have had a very low level of inflation since the financial crisis. If inflation remains low, monetary policy can remain looser (the actions of the central banks to control the flow of money in the economy) and interest rates may not need to rise too much. This would mean that recession is less likely, and a cyclical bear market therefore would not be imminent.
Furthermore, the post financial crisis financial regulation imposed has led to less borrowings amongst banks and companies. This makes a structural bear market less likely.
The event driven bear market by its very nature is an unknown.
We could therefore see a period of low returns rather than a bear market. However, if inflation does rise further causing higher interest rates, it is very likely that we will experience a bear market and a correction / downturn in the stock-markets.

The Service we provide for our clients

As always, we believe investors should remain focussed on the medium to long term, investing over ‘time’, rather than trying to ‘time the market’.
Through our research at Loughtons, supported by the expertise of Morningstar, we focus on the intrinsic value of a particular asset. We continue to assess the quality of any investment opportunities which come about as the result of our investment process and strict fund selection criteria. A long-term outlook when investing is clearly desirable, as short-term expectations can turn out to be unrealistic where events cannot be anticipated.
Therefore, active management remains important and generally volatility can be partially mitigated by diversifying investments across a broad range of asset classes that include equities, commercial property, fixed interest securities (bonds) and cash to spread risk even further.
We will always look to ensure that clients have a portfolio that reflects their requirements which is based on their attitude to risk and capacity for loss, whilst considering what the impact the current stage in the economic cycle has on the exposure to various assets.

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Interest Rates and the effects on your Investments

Tue, 01 Aug 2017 12:07:30 +0000

Current Position

Inflation figures for June revealed an unexpected fall in the Consumer Prices Index (CPI) rate to 2.6% after seven months of rising rates and May’s high of 2.9%. Possibly, inflation is now at, or close to, its post-Brexit-vote peak, and an interest rate rise may not be forthcoming after all.
The recent inflation dip was largely the result of falling oil prices, which offset rising food and import costs. Inflation remains above its 2% target and only time will tell whether this result will be sustained or a blip in an otherwise upwards trend.
However, this higher inflation, increases in the US Federal Reserve’s central rate and the prospect of a ‘softer’ Brexit following the recent general election result, are all sound reasons why an interest rate rise in the UK could still occur later this year.
A rise after such a long period of low interest rates would no doubt be viewed as a positive sign of economic health, but it presents new challenges, and new opportunities, for those owning investments whose valuations are linked with interest rates.

Why have rates been so low for so long?

The credit crunch of 2008/2009 thrust the UK banking system into a severe funding shortage, restricting its ability to lend.
Consequently, consumer demand & house prices fell along with economic growth. The Bank of England acted promptly to boost liquidity by cutting the bank rate to 0.50% and by injecting money into the economy through ‘quantitative easing’. (the purchase of government bonds).
Interest rates were once again cut, this time to 0.25% in August 2016 to help shore up the anticipated economic fallout from the EU referendum.
Lower interest rates create the environment to spend by making borrowing cheaper, and provide no motivation to save due to poorer returns.
Before long, borrowers chose to use the extra money to start paying down debts and savers with a set goal in mind, say building up a deposit for a house, have combatted low returns on savings by cutting spending further to make up the shortfall.
Furthermore, interest rates have largely been low for such a long period because economic indicators have remained subdued. The economy has become increasingly reliant on cheap money, and quantitative easing has proven difficult to unwind.

Why might higher inflation trigger an interest rate rise?

Interest rates are generally used to control inflation and it is increasingly difficult for the bank’s Monetary Policy Committee (MPC) to sustain a ‘wait and see’ approach.

Source: Bank of England and Office for National Statistics.

Until June’s inflation figures, there has been a clear upward trend in inflation since late 2015, which accelerated after the Brexit vote, taking us to the highest rate for over five years in May.
The MPC inflation report forecasts that CPI will rise further above the target in the coming months peaking at a little below 3% in the fourth quarter of the year before falling gradually.
Inflation is forecast at 2.8% for 2018. If it is prolonged above the 2% target it could become embedded through underlying ‘cost push’ pressures (where general price levels rise due to increases in the cost of wages and raw materials). This will not be helped by a government lacking political authority to control demand via fiscal policy. (where the government adjusts its spending levels and tax rates to monitor and influence the economy).
In these circumstances, interest rates could rise over 2017-2020 anyway.

Will the UK follow the US?

The US Federal Reserve (Fed) has raised its central interest rate in recent months. It now sits at 1.25% and is expected to increase it once more in 2017, and again in 2018. This, coupled with accelerating global growth, will also put broader pressure on UK rates to rise as UK interest rates tend to broadly mirror those of the US over time.

What about sterling?

It is likely the drop-in sterling that followed the announcement of June’s inflation figures is short lived, and sterling may rise back towards its pre-referendum levels.
Why? The government has a slim parliamentary majority. Therefore, it will be politically difficult to control demands for higher public spending or impose higher taxes. This is likely to result in the annual deficit and government borrowing being higher for longer. This could in turn drive up interest rates over time.
Also, there is a probability of a ‘softer Brexit’ in which the UK manages to sustain favourable terms of trade with the EU in exchange for trade-offs around three other Brexit factors: annual payments, immigration, and sovereignty.

How will higher interest rates impact Investments?

Rising interest rates bring both opportunity and risk. In general terms, developed equity markets tend to look over-valued at present. In the United States in particular, price to earnings (P/E) ratios are at historic highs, profits as a percentage of GDP have reached record levels, and the dollar is strong against a Brexit-weakened sterling.
UK equities too have fared remarkably well since the Brexit vote, as the weakening currency bolstered overseas earnings. But we need to be wary of relying on further sterling depreciation as we get deeper into the Brexit negotiations.
However, ‘Emerging Markets’ now appear good value compared to developed markets and they could offer the prospect of higher growth potential and superior opportunities going forward.
As always, we believe investors should remain focussed on the medium to long term, shutting out market noise associated with the above events. Through our research at Loughtons, supported by the expertise of Morningstar, we focus on the intrinsic value of a particular asset. We continue to assess the quality of any investment opportunities which come about as the result of our investment process and strict fund selection criteria. A long-term outlook when investing is clearly desirable, as short-term expectations can turn out to be unrealistic where events cannot be anticipated.
Therefore, active management remains important and generally volatility can be partially mitigated by diversifying investments across a broad range of asset classes that include equities, commercial property, fixed interest securities (bonds) and cash to spread risk even further.
We will always look to ensure that our clients have a portfolio that reflects their requirements (attitude to risk and timeframe for investment) whilst considering what the impact the current stage in the economic recovery has on their exposure to various assets.

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Trouble at the Top

Tue, 13 Jun 2017 18:35:40 +0000

It is now clear that our Prime Minister underestimated the strength of populist sentiment and we are now in a position where no party has managed to achieve a parliamentary majority. The opinion polls prior to last Thursday’s vote pointed to a Conservative win although not the landslide that was expected just a few weeks ago, so what does this mean for the UK and more importantly to investment markets?

The result (if that is not a contradiction) is that the Conservative party will be relying on the Democratic Unionist Party to provide them with the majority and this will inevitably create some short-term volatility in equities, bonds and particularly currency markets as this will knock confidence in the UK. Without an overall majority Theresa May will not have the strong mandate for running the country that she desired or for that matter when she starts her Brexit negotiations scheduled for 19^th June. The prospect of another general election would be a risk to the Conservatives at this time and furthermore if they could hold on until October 2018; when constituency boundary changes take effect, these are estimated to bolster the Tory presence by a net 25 to 30 seats. No doubt we will all watch this develop over the next few months with interest.

It comes as no surprise that markets hate uncertainty, and from that perspective this is one of the worst possible results at a time when the political process of Brexit demands firm direction, and as we have seen Sterling has already been hit. It is likely that continued uncertainty will put a lid on the UK equity market however over the last few years markets have been extremely resilient to the plethora of shocks that they have had to cope with, from terrorism to the Brexit vote and the US presidential election result to name just a few.

It is also worth considering that the likelihood of a Conservative-led coalition, will see extra public expenditure commitments increased and this could prove to be popular with some disenchanted voters.

So what are we doing as advisers and what should we all do as investors? Once again we need to take stock and to consider our ‘medium to long term’ objectives before rushing into any ‘short-term’ conclusions. Our investment decisions have been built on a medium to long term diversified and structured process, and as such whilst over the last 6 to 12 months we have been selectively taking profits from our clients’ portfolios where appropriate, we do not consider now is the time to make rash assumptions. Watch this space……

For clarification of any points discussed above and any future independent advice regarding your own financial planning, please do contact us on 01626 833225 or email advice4u@www.loughtons.co.uk

Important Information
The views and opinions contained herein are those of Loughtons Independent Financial Advisers and may not necessarily represent views expressed or reflected in other economic communications, strategies or funds.
This article is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Loughtons Independent Financial Advisers does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Loughtons Independent Financial Advisers has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system.
Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

UK Elections and the effects on Stock markets

Sat, 29 Apr 2017 08:32:55 +0000

Following the announcement for a ‘snap-election’ on the 8th June, there has been speculative activity among traders with sharp moves in the value of the pound and UK companies.

What Happened and Why?

Theresa May is said to want greater power and leverage in the Brexit negotiations which she expects to be gained from a greater conservative majority in the house of commons.
We are only just beginning to comprehend Theresa May as a new leader. Her approval rating has been gradually increasing whilst that of Jeremy Corbyn has been declining.
However, some believe the snap election may demonstrate the difficulties ahead of the Brexit negotiations with the EU.
The reality is that there will be a problematic nature to the split with the EU and as investors we face a wide range of outcomes regardless of the election outcome.

Long Term Impact on Markets

Investors are naturally worried about the impact of the UK election on their invested assets.
With asset prices rising the outlook for investors has worsened relative to their long term ‘fair value’.
The opportunity to invest into a high-quality market at a lower cost, may be provided by the impact of sterling on near term profits of businesses. Sterling has been weak as it has borne the brunt of Brexit fears.
This has boosted share prices in a market dominated by global companies who earn significant profits in other currencies and these currency-driven-changes in share prices can create excellent opportunities for investors.
UK Government bonds which traditionally can be unattractive in respect of the returns against inflation, are sensitive to political risk and therefore these may improve as the election nears.

Opportunity Amid Chaos

Political change has an impact on investment markets in the short term, but rarely has a sustainable impact over the longer term and therefore the situation we describe above could create opportunities for long term investors.
However, the UK election can create dangers for investors. For example, the temptation to react too quickly or with too much confidence in the outcome of a particular event. This lesson is reinforced by the market movements following the US presidential election in 2016.

Our Approach

We believe investors should remain focused on the medium to long term, shutting out market noise associated with the above events.
Secondly, through our research at Loughtons, supported by the research expertise of Morningstar, we are able to focus on the intrinsic value of a particular asset. For example, analysing assets that are priced cheaply enough to provide attractive rewards for risk.
However, markets will continue to be volatile and therefore active management remains important. As previously stated, equities aren’t the only asset to consider for long term investment and generally volatility can be partially mitigated by diversifying investments across a broad range of asset classes that include equities, commercial property, fixed interest securities (bonds) and cash to spread risk even further.
We are convinced that for medium to long term investors ‘patience will be rewarded’. We continue to assess the quality of any investment opportunities which come about as the result of our investment process and strict fund selection criteria. A long-term outlook when investing is clearly desirable, as short-term expectations can turn out to be unrealistic where events cannot be anticipated.
We will always look to ensure that our clients have a portfolio that reflects their requirements (attitude to risk and timeframe for investment) whilst considering what the impact the current stage in the economic recovery has on their exposure to various assets.

For clarification of any points discussed above and any future independent advice regarding your own financial planning, please do contact us on 01626 833225 or email advice4u@www.loughtons.co.uk

Spring Budget 2017 Update

Thu, 09 Mar 2017 15:46:49 +0000

Spring Budget 2017 Update
Yesterday, Philip Hammond the Chancellor of the Exchequer, delivered the last Spring Budget (although as he joked, we’ve been told that before, by Norman Lamont in 1992).

There were no significant tax or pension changes in yesterday’s Budget that will have any immediate impact, allowing all to plan for the tax year ahead with confidence and clarity. This was the Chancellor’s intention of changing when the budget will be presented, with the Autumn Statement now abolished, with a toned-down statement on the economy delivered each March. This will give welcome breathing space between the announcement of Budget changes and their introduction.

Some of the key points from yesterday’s statement were:

A fairer tax system
Well, that is for you to decide, but as part of a drive to make the tax system fairer, two main changes will come into effect from April 2018

1. Reduction to the dividend allowance
The annual dividend allowance introduced last year will remain at £5,000 for the 2017/18 tax year, but will then drop to £2,000 from April 2018. In particular, this will hit small and medium sized business owners who take their profits as a dividend. Employer pension contributions will become an even more attractive way of extracting profits from a business. Where the director is over 55 they can now have full unrestricted access to their pension savings.

2. Increase in National Insurance Contributions (NICs) for the self-employed
Self-employed class 4 National Insurance contributions will increase from 9% to 10% from April 2018, with a further increase to 11% from April 2019. This will close the tax gap between the self-employed and employed.

This coincides with the removal of the flat rate class 2 NICs for the self-employed from April 2018. Self-employed individuals have been eligible for the same flat rate state pension as employees since April 2016, and so the increases will go some way to paying for this.Whether these measures are seen as fair, will depend on your point of view. Some are already stating this is a break in the government’s manifesto pledge and it remains to be seen how reaction continues to develop over the coming days.

Business owners and entrepreneurs will argue that they should receive a ‘tax dividend’ due to the risk they take in setting up in business on a self-employed basis. Indeed, many of these have been the lifeblood of the economy as we have arisen from the mire of 2008.

QROPS clampdown gets overseas pension transfers back to basics
What on earth is a QROPS? A QROPS (Qualifying recognised overseas pension scheme) is where a former UK resident transfers their pension overseas to a similar arrangement with comparable tax treatment to the UK, by agreement with HMRC.

A new 25% tax charge on some QROPS transfers effectively restricts penalty free movement of tax relieved UK pension funds overseas strictly to the ‘vanilla’ circumstances originally envisaged.

There’s no change for those seeking genuine pension portability by moving their pension savings overseas:

to their employer’s occupational pension scheme; or
to their country of residence; or
within the EEA.

However, the tax clampdown, which applies to transfers requested after 8 March 2017, will hit those moving their pension to ‘third party’ jurisdictions to avoid UK tax. Anyone whose status changes within 5 years of a transfer, such that they fall outside the penalty free categories, faces a tax charge after the event reducing scope for ‘jurisdiction hopping’.

As well as recovering tax for the Exchequer, this should also help protect UK pension savers against overseas pension scammers.

Tax avoidance deterrents strengthened
As part of the Government’s objective to stop the loss of tax revenues through avoidance schemes, it confirmed that a financial penalty on the enablers of a scheme that fails the GAAR (General Anti Abuse Rule) test will be introduced from July 2017. Enablers include anyone involved in the design or promotion of a scheme and who may ultimately benefit from a client using the scheme, for example, by charging them a fee. The penalty could be as much as the amount of tax avoided.

The intention is clearly to deter anyone in the supply chain from getting involved in the first place, killing such schemes before conception. This is not a concern for mainstream tried and tested planning solutions, such as the use of trusts, which continue to be viable options for those wishing to undertake effective estate planning.

Social care: green paper and red light to ‘death tax’
Demographics continue to drive the search for innovative solutions for long term care funding.

The government will set out proposals for future funding of social care in a green paper to be published later this year. The Chancellor confirmed that a ‘death tax’ (a flat rate charge applicable to all estates) would not be among the measures considered.

State Pension
To ensure that the State Pension remains sustainable and fair across generations, the government is carrying out the first statutory review of State Pension age. The government will consider all the evidence – including an independent report by John Cridland, before publishing its review by 7 May 2017.

NS&I Investment Bond final rate
The Budget confirms that the rate on the NS&I Investment Bond announced in the Autumn Statement 2016, will offer rate of 2.2% over a term of 3 years and will be available for 12 months from April 2017. The Bond will be open to everyone aged 16 and over, subject to a minimum investment limit of £100 and a maximum investment limit of £3,000.

Rates & allowances and what we already knew
Here’s a reminder of what we already knew was coming in 2017/18 which you may need to consider:

2017/18 tax rates and bands confirmed

The personal allowance for 2017/18 is confirmed as £11,500 and the higher rate threshold will rise to £45,000. Increases are planned to £12,500 and £50,000 respectively by 2020.
The increase to the higher rate threshold will not apply in Scotland where the threshold will remain at £43,000.
The individual capital gains tax allowance will increase to £11,300.

Inheritance Tax (IHT) residence nil rate band

From April 2017, you may be entitled to an extra £100,000 IHT nil rate band where the family home passes to direct descendants on death.

Lifetime ISA introduction

Under 40s will have a new savings option which can help them to get a foothold on the property ladder.
Up to £4,000 a year can be paid into the Lifetime ISA and this will receive a 25% Government Bonus.
Most first time house buyers can access their fund tax free prior to age 60.

£20,000 ISA allowance

The ISA savings allowance is set to receive an above inflation increase. Savers will be able to enjoy an additional £4,760 of tax free savings.

Reduced Money Purchase Annual Allowance (MPAA)

The MPAA is to be cut from £10,000 to £4,000 from April 2017. This only affects those who have accessed their Defined Contribution pension under the new pension flexibilities and wish to continue paying into their pension.
Those only accessing their tax-free cash, or who were already in a capped drawdown arrangement and haven’t exceeded the cap, will keep the full £40,000 allowance.

Corporation Tax cut

The rate of Corporation Tax will be cut from 20% to 19% from 1 April, with a further cut to 17% to follow in April 2020.
Business owners may want to take advice about accelerated pension funding ahead of any rate cut to reduce profits which would otherwise by taxed at the higher rate.

Summary
There is a difference between Chancellor Hammond’s approach and that of his predecessor, George Osborne. Much of the austerity that had been embedded in Osborne’s plans has been removed and there is now more than £100bn of extra borrowing proposed over the next five years than there was in Osborne’s last budget.

For the Chancellor to borrow this extra money indicates that the economy has been performing better than expected.

The Office for Budget Responsibility has upgraded its growth forecast for the current year from 1.4% to 2.0%, which is positive.

Of course, there are challenges ahead economically – not least, the public debt burden which, despite recent improvements, remains significant – but the UK economy is relatively well-placed to deal with them and we should see this burden begin to diminish over the next five years.

Important Information
Please note that the above article does not constitute financial advice.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

With Freedom comes Responsibility

Mon, 27 Feb 2017 22:20:31 +0000

The new pension freedoms were launched in April 2015. It would be fair to say that these are a double-edged sword if used in wrong way.

Unfortunately, like a credit card, it depends who is in control. Just because you can, doesn’t mean you should! Used well, these can add real benefit, but used poorly and the consequences are well documented. It is the same with the new-found freedoms.

But pensions are not as easy to understand as credit cards.

Careful planning in conjunction with a financial planner can ensure that you make the most of these freedoms without falling foul of common mistakes. Poor planning can create irrevocable mistakes that could affect your financial future.

It’s also not just a simple case of ‘That’s how much I have, so that’s what I can spend,’ because if you make that choice, for many this will have repercussions and consequences that may not be anticipated or which materialise for many years.

The government may have us believing that a pension fund is a bank account. That is not our view. A pension is there to provide an income over the long-term, potentially spanning decades.

If I go into a supermarket and fill my entire trolley with cream cakes and alcohol and then go home and consume these, there is nothing anyone can do to stop me, provided I don’t cause an offence in doing so. However, objectively, this probably isn’t in my best interests in the short, medium or long term. It is the same with pensions. Essentially, provided the scheme allows it, you can do what you like, when you like. But that doesn’t mean it’s a good idea!

Pensions, if invested efficiently, can also potentially continue to grow in retirement. Pensions also have tax benefits which can continue both pre and post death, if understood correctly. Consequently, the failure to make use of other savings first which don’t have this potential, is common.

Drawing more money than is needed and adding these funds to an already low rate paying bank account, only to see the funds remain on deposit, is another common mistake.

We also mustn’t forget the timing of events.

So, ‘What?’, ‘When?’ and ‘How much?’ are critical to a sustainable lifestyle in retirement and beyond to your beneficiaries.

Here are some of key things to look out for:

Using Tax-Free Cash Before Other Savings
If you draw out your tax-free cash (now called a pension commencement lump sum) from your pension, it becomes part of your estate and doing so will also generally limit the ability for these funds to grow tax-efficiently in future.

General speaking, people should consider withdrawing from taxable savings first, then tax-free savings such as ISAs and then finally their pension. This will ensure they keep their pension, which is generally the most tax-efficient way of saving, sheltered from tax for as long as possible.

Drawing out More Than Is Needed
Pension laws do not require you to draw out all of your tax-free cash at once. If your pension scheme allows it, you can access only part of your tax-free cash and then keep the rest invested for later. This means that it can grow to more tax-free cash for the future.

Drawing Tax-Free Cash at The Wrong Time
Tempting isn’t it. Once you have identified a use for their tax-free cash, you may be keen to take it out. If you do that just after the investments in your pension have fallen in value, then you will be locking in that loss. Timing the market isn’t possible, but if there has been a big market fall, ask yourself honestly if you really need the money now, or can draw the funds from elsewhere, or whether you can afford to keep it invested for longer with a view to making up any losses when markets recover.

Drawing Tax-Free Cash and Doing Nothing With It
You may be considering accessing your tax-free cash for specific reasons such as paying off debt or to fund home improvements. However, it does appear that many people are drawing it out simply to save it elsewhere, often in a bank account.

This is not a good idea for several reasons. Firstly, because once it is in a bank account, any returns it earns could be subject to tax, whereas it would have grown tax-free in a pension and secondly, the bank deposit will be included in your estate for inheritance tax purposes whereas it is normally exempt from inheritance tax while in a pension.

Thirdly, having additional assets in a bank account may affect your ability to claim certain benefits whereas, if it is held in a pension, it is generally not considered.

So even if you then put the tax free-cash into other investments, you may find that you are only receiving the same returns which you were receiving in your pension fund, but now the money is subject to the problems listed above.

Drawing Tax-Free Cash When Not Paying Tax
Where your income means that you don’t use up your personal income tax allowance (currently £11,000 for the 2016/17 tax year), then it may not make sense to draw out taxfree cash. Instead, you may want to consider making a withdrawal from your pension plan, which is partly potentially-taxable.

The advantage of this is that you would then retain more tax-free cash in your pension, allow it to grow for the future.

However, accessing the income element of your pension fund will limit you to save a maximum of £10,000 into your pension in the future (in the current tax year and falling to £4,000 in the 2017/18 tax year).

Not Claiming The Full Tax-Free Amount
If someone has been in a pension scheme before 2006, then they may benefit from transitional protection within their pension scheme, often referred to as ‘protected tax-free cash’. The rules are quite complex and you should take advice, but this could mean that you are entitled to more than 25% of your pension as tax-free cash.

Choose carefully!

If you wish to take a step in the right direction with planning your finances, please feel to call us on 01626 833225 or email us to find out more or to arrange an initial complimentary meeting.

Important Information
Please note that the above article does not constitute financial advice.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Economic Outlook – Theresa May’s Brexit Speech

Wed, 18 Jan 2017 11:54:13 +0000

Yesterday, the Prime Minister finally delivered her 12-point plan for taking the UK out of the EU. In her detailed speech, she set out her vision for a ‘managed Brexit’ that would seek ‘a new, positive and constructive partnership between Britain and the European Union’. Here we comment briefly on global economic progress and the background for a ‘managed Brexit’:

The Global economy has started well in 2017 with good momentum. We believe ‘Reflation’ (expanding economic output, which is the total value of all goods and services produced) should gather pace through the year. However, the main risks will be politics and protectionism (restraining trade between countries through methods such as tariffs on imported goods and restrictive quotas).

Global economies were positive in 2016 and the pace of recovery accelerated in the second half as commodity prices stabilised and China’s financial stimulus program (essentially funding from the Chinese government) commenced. Inflation has now become a talking point again and economists generally feel that the global economy is in a good place moving into 2017.

The US economy is very much in focus as we get more clarity on the speed and effectiveness of policy changes under President Trump. A stable oil price, historically low unemployment and more investment following tax reforms mean that inflation will increase. However, a higher dollar, higher interest rates, immigration restrictions and perhaps less trade suggest there will possibly be ‘headwinds’ as well this year.

China will be the principal economic focus as a progressive withdrawal of financial stimulus (to slow down the country’s property market) slows her Commodity producers and economies most closely linked to the Chinese economy are at risk.

In Europe, easier fiscal policies (adjustment of government spending levels & tax rates), strong real wage growth and good private consumption trends could mean positive outcomes for 2017. That could allow the European Central Bank (ECB) to taper (reduce) its Quantitative Easing (QE) programme later in the year. However, Europe also faces some potential headwinds, notably from the UK, where any Brexit-related slowdown could affect the continent through the important trade links between the two.

The UK survived Brexit (But we’re still in the EU! – Ed) much better than many observers expected. How sustainable this proves in 2017 is a moot point, with the implementation of ‘Article 50’ likely to act as a reminder of the difficult period of negotiation ahead.

Following the Prime Minister’s speech yesterday, here’s a breakdown of the key points:

The UK will leave the single market but seek a new and equal partnership between the UK and the EU.
The UK will leave the EU customs union.
The UK will try to negotiate transitional arrangements to allow business to adapt to a new regulatory and legislative framework.
Existing workers’ rights will be maintained and protected.
A wish to guarantee the rights of EU workers currently in the UK to remain.
The UK will try to secure a phased transitional deal to avoid a ‘cliff edge’ scenario, which may bring a threat to economic stability.
The UK will aim for a new ‘bold and ambitious’ trade agreement with the EU and new free trade deals globally.
The Government will put the final deal to a vote in both the House of Commons and House of Lords before it is adopted.
The Prime Minister says the UK may have to ‘change its economic model’ if it does not secure a good deal from the EU

In response, the pound rose at the news that Parliament would get to vote on any Brexit deal, and the speech overall provided some much-needed clues as to what Brexit will mean for UK businesses. With European elections throughout the year, it is unclear whether much if anything will be decided this year and that will increasingly raise the prospect of an abrupt and disruptive departure from the EU in 2019. Nevertheless, much depends on how negotiations unfold over the coming years………

As financial planners, we are truly committed to helping you achieve your financial planning goals.

During any period of uncertainty, expert advice is at its most important. Loughtons can help design a long-term financial plan, providing contact & reassurance at times like these. If you are worried about any aspect of your finances and how the Brexit vote may have affected you, contact us on 01626 833225 or email us at advice4u@www.loughtons.co.uk to discuss arrange an initial complimentary meeting.

Important Information

The views and opinions contained herein are those of Loughtons Independent Financial Advisers and may not necessarily represent views expressed or reflected in other communications.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Autumn Statement 2016 – Commentary

Thu, 24 Nov 2016 14:18:15 +0000

This will be the last Autumn Statement. In future, the Budget Day will switch from spring to autumn, with a toned down statement on the economy delivered each March. This will give welcome breathing space between the announcement of budget changes and their introduction.

Philip Hammond’s first Autumn Statement didn’t contain any major tax or pensions changes that have any immediate impact for investors.
There was welcome news that pension tax relief remains untouched. It appears that now is still not the time for a major pensions shake up, but it could be the perfect time to maximise funding and secure higher rate tax relief.
This will be the last Autumn Statement. In future, the Budget Day will switch from spring to autumn, with a toned down statement on the economy delivered each March. This will give welcome breathing space between the announcement of budget changes and their introduction.
The key points from today’s statement were:

Reduced Money Purchase Annual Allowance

The Money Purchase Annual Allowance (MPAA) is set to be cut from £10,000 to £4,000 from April 2017 (subject to consultation). This only affects those investors who have accessed their Defined Contribution pension under the new pension freedoms and continue to pay into their pension.
Just taking the tax free cash out of a pension, without drawing an income, doesn’t trigger the reduced annual allowance.
Anyone who was already in capped drawdown before 6 April 2015, and doesn’t exceed their ‘capped’ income limit, will retain a £40,000 allowance.
For many investors, the first time they dip into their pensions will be the day they stop work. So a drop in their annual allowance is of no significance. But some may wish to phase their retirement, perhaps by cutting their working hours. These investors may still wish to continue funding or more importantly could be benefiting from employer contributions.
Some older pension schemes may only offer Uncrystallised Pension Funds Lump Sums (UFPLS), where each withdrawal is fixed as 25% tax free cash and 75% taxable income. This will automatically trigger the cut to the £4,000 allowance.

Salary sacrifice remains a tax efficient choice for pension savers

There will be no changes to the funding of pensions via salary sacrifice.
Certain other employee benefits will no longer receive the tax and National Insurance advantages of salary sacrifice from April 2017, meaning they’ll be in the same position as other workers who buy benefits out of their net pay. This will include exchanges for benefits such car purchases, parking, school fees, gym memberships, travel insurance and smart phones, although there will be some protection for existing arrangements until April 2018 (2021 for cars and school fees).
Salary sacrifice allows employees to boost their pension pots through savings in employer and employee National Insurance following an agreed reduction in pay. A higher rate taxpayer could increase their pension contribution by up to 18% by reinvesting their savings in employer and employee National Insurance.

2017/18 income tax rates and bands confirmed

The increase in the personal allowance in 2017/18 is confirmed as £11,500 and the higher rate threshold will rise to £45,000. Increases are planned to £12,500 and £50,000 respectively by 2020.

Remedy for bond gain pain – but prevention is better than cure

Investment bond owners who unwittingly face a large tax charge as a result of surrendering part of their bond will have a remedy from 6 April 2017.
Many bonds are set up with multiple identical segments for flexibility on encashment, allowing each segment to be cashed in independently. But a large surrender can also be taken from all the segments – which may lead to an unexpected chargeable gain which bears no resemblance to the actual investment performance.
Savers who find themselves in these circumstances will be able to apply to HMRC to have the gain recalculated on a ‘just and reasonable’ basis. Further detail on how this will work is expected in Finance Bill 2017.

What we already knew

IHT residence nil rate band
From April you may be entitled to an extra £100,000 Inheritance Tax nil rate band where the family home passes to directly to descendants on death.
Lifetime ISA introduction
Under 40s will have a new savings option which can help them to get a foothold on the property. Up to £4,000 a year can be paid into the Lifetime ISA and receive a 25% Government Bonus. First time house buyers can access their fund tax free prior to age 60. For further details see our Guide to ISAs.
£20,000 ISA Allowance
The ISA savings allowance is set to receive an above inflation increase. Savers will be able to enjoy an additional £4,760 of tax free savings.
Corporation Tax cut
The rate of Corporation Tax will be cut from 20% to 19% from 1 April 2017, with a further cut to 17% to follow in April 2020. Business owners may want to consider accelerated pension funding ahead of any rate cut to reduce profits which would otherwise by taxed at the higher rate.

If you wish to take a step in the right direction with planning your finances, please feel to call us on 01626 833225 or email us at to find out more or to arrange an initial complimentary meeting.

Important Information

Please note that the above article does not constitute financial advice.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited.

JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Post US Election Reaction

Thu, 10 Nov 2016 16:00:47 +0000

As with Brexit, not may people foresaw Donald Trump emerging as winner of the US presidential election. There is obviously a considerable amount of discontent and frustration across Western democracies.

This election result is a vote against the political establishment from a large part of society that is angry that government policy has done little to help it since the global financial crisis some 7 years ago.

Whilst changes are now likely to be forthcoming, it is difficult to have immediate clarity on what these will be.

Deja vu all over again. When considering the financial markets, we have seen this all before, courtesy of the aftermath of the EU referendum in June. Initially, markets have been somewhat muted and perhaps investors have learnt that there is no need to panic.

However, globalisation will come under the spotlight under a Trump administration and we could expect a greater focus on domestic political priorities at the expense of free trade and globalisation.

Having said that, many people will be concerned about what we’ve heard Trump say over the last 18 months of campaigning. As always seems to be case, the constraints of office should mean that what he can do as president is likely to be much more moderate. Lots of things that are said on the campaign trail cannot be delivered.

Direction of Interest Rates
In terms of monetary policy, the result makes a December interest rate rise in the US less likely. The Fed is likely to have more than half an eye on its role as global financial market policeman and the uncertainty that this election result creates for the global economy and, for emerging markets, could weigh on its policy decision in December.

Overall, it would seem reasonable to expect the momentum in the US economy to continue. This should result in modest growth in 2017, relatively low inflation and interest rate increases. Consequently, it is unlikely that there would be a US recession.

…the constraints of office should mean that

what he can do as president is likely to be much more moderate.

Lots of things that are said on the campaign trail cannot be delivered.

How should investors respond?
Brexit and the US presidential result should remind investors that there is plenty of scope for political surprises. There are several significant elections looming in Europe over the next 18 months, which could be profoundly important for the future of the Eurozone project. It would be wrong to assume that America has a monopoly on disgruntled voters and we will keep a very close eye on political developments.

Important Information
Please note that the above article does not constitute financial advice.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited.
JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

State Pension Top-Up – Time is running out

Sat, 05 Nov 2016 08:32:18 +0000

The Department of Work and Pensions (DWP) has recently issued a reminder to all those who have expressed an interest in topping up their Additional State pension by up to £25 per week. The option to make Class 3A Voluntary Contributions applies to individuals who attained their state pension age on or before 5 April 2016, i.e. individuals who receive, or will receive, their State Pension under the old rules, not the new flat rate state pension.

If this applies to you, you have until 5 April 2017 at the latest to contribute.

Is this still worth considering?
It has been possible to make voluntary National Insurance Contributions (Class 3A Voluntary NIC) since October 2015. When the Government announced the details of these earlier, they stated that the rate offered would be in line with the market.

However, even when they became available it was not possible for an individual in good health to secure a pension annuity paying the same level of income as achieved from paying Class 3A NICs.

However, since then, annuity rates have fallen.
According to the Money Advice Service website on 28 October, for an individual aged 66, to secure an income of £1,300 p.a. with a 50% spouse’s pension that is index linked would cost over £46,900.

To obtain the same level of income a Class 3 NIC would cost £21,775 based upon the DWP calculator run on the same date.

The cost of a State Pension top up is based on a person’s age and takes average life expectancy into account. For a 65-year-old, an extra £10 of pension a week will cost £8,900, whereas for a 75-year-old the contribution rate for the same amount of pension is £6,740.

In simple terms, the Government offer, which was generous when it was launched has, due to the changes in the annuity market, become very attractive.

If you have attained your SPA on or before 5 April 2016 and you have spare capital and are concerned about the low level of cash deposit interest rates, this offer is still on the table.

More information on State Pension top up and how to apply is available here. This includes an online calculator which illustrates the contribution rates based on age and the additional amount someone wishes to receive.

If you are unsure if making a voluntary contribution is suitable for you, you should obtain independent financial advice before proceeding.

But time is running out…..

The state pension is only one small aspect of a complex financial world that we all live in.

If you wish to take a step in the right direction with planning your finances, please feel to call us on 01626 833225 or email us at to find out more or to arrange an initial complimentary meeting.

Important Information
Please note that the above article does not constitute financial advice.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited.

JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Summer or Winter?

Sat, 29 Oct 2016 08:37:54 +0000

Summer or Winter?
Now is the winter of our discontent ……. as the opening soliloquy of Shakespeare’s Richard III begins, as Richard, Duke of Gloucester forms his Machiavellian plans to take the crown. For many, their finances are a lifelong ‘winter’. This post is not aimed at those who need society’s support and help, but more at those who can help themselves! A good place to start is to identify the current level of reserves you hold. That is ‘cash’ that you don’t immediately need for day-to-day use, but those funds you can put by for emergencies or a specific future goal. The BBC reported recently that millions have less than £100 in savings. These people are at risk and this needs to change. However, starting saving can be difficult.

Newton’s Laws & Saving
The answer could be down to Physics. Newton’s First Law states that an object will remain at rest or in uniform motion in a straight line unless acted upon by an external force. Blimey! What’s that got to do with money? Well, this law applies to your finances too!

Clever bloke, Isaac Newton!

Getting something going and moving in the direction you want, can be hard work at the start, but it gets easier. The saying ‘the first million is the hardest’ is true, but equally true is that the first

It’s essentially a choice. Your choice!The Universe is entropic. Everything falls to decline if efforts are not made to the contrary. It’s easy to spend all your money now and not bother putting anything aside for the future. The natural flow is money in, money out…. but if you want to plan effectively, you need to work against the flow, keeping a bit back from going out the door.

I was lucky. I grew up in a family, which whilst not wealthy, was thrifty. My parents didn’t spend all their income each month. They put back some money each month for emergencies, Christmas, holidays etc. It was hard for them to do this, very hard, but they did it and it got slowly easier over time. When I began work at 16, I was taken to one side after my first month’s pay was received and advised to ‘keep a bit back’. I’ve been doing this now for 30 years!

Why you need to save
For most people, it’s a good idea to have some money put aside for a rainy day. Putting some money away regularly is the best way of saving up for expensive things, like a holiday, car, or a wedding. It can also be a good way of making sure you have money to pay for emergencies such as needing to replace an expensive household item.

The quicker that debts can be repaid, the quicker that money can be directed towards longer-term goals. With people coming out of university with debt potentially of upwards of £50,000, it is understandable why people cannot get on the housing ladder and secondly why they cannot then save enough money. It is a massive challenge but one that people need to start or else we will have a generation of people that have significantly substandard standards of living in the later years.

You can use credit cards or take out a loan to pay for things like these, but this will cost you money and in some cases, could lead to debt problems if you don’t manage the repayments properly. You can also save money for the long-term, such as retirement. It can be difficult to think about doing this, especially when you’re young and retirement seems such a long way off. If you’ve got money to spare, it’s tempting to spend it on things you want to buy and do now.

But it’s a good idea to think about whether you’ll have enough to live on when you are older and no longer earning money. Think about the kind of lifestyle you want and how you are going to pay for it

You will need to sacrifice some spending now, to be able to have a comfortable retirement and lead the kind of life you want to in the future. The most common way to save for retirement is with a pension, but you can also invest your money in other ways to save for the future.

Cake & Eat it?
It would be very nice to have all our available income to spend every month. The fact is that some of that income needs to go towards providing a resource for when we are no longer working. This is the move towards financial independence. The larger the sums saved for the future, the larger and more sustainable resources we will have during the years when we are not working. The shorter the period that one works the more one needs to save in that time-frame. Early retirement can be an irrevocable mistake.

Therefore, the earlier that one retires, the more difficult it is to provide the necessary funding. One’s earnings threshold is typically higher during our older years and at that time this may be your peak opportunity to save as much as possible. Retiring early, will certainly put a stop to that.

Common reasons to save include:

Emergency Funds – You’ll never know when the unexpected could occur. That’s why it’s unexpected! Not having an emergency fund will possibly interrupt the other plans you are making in your financial plan. You may find you need to tap into resources which are designated for other purposes, watching your plan implode in front of you. It’s not a pleasant experience. You might need money to help you pay for an urgent repair to your home like a boiler replacement, or if you need to replace an essential household item such as a washing machine or cooker.
Leisure, entertainment & fun – Everything in balance.
Financial Protection – What happens if you don’t have insurance and cannot work due to losing your job or accident or illness? Of course, you could take out some insurance but this alone may not be enough. In this situation, some accessible savings may just be the difference between survival and financial problems lasting for the rest of your life.
Future Spending – For most people, they will never have more disposable income than when they are working. When retired, most people have much less disposable income and their ability to replace capital will reduce considerably. If you don’t save enough now, you will come to rue this choice later in life.
Specific Purchases – You might want to save up for something specific in the future such as a wedding, a new car or your retirement. I remember the analogy of people saving in different pots for different reasons. This is a good one and you can open different savings accounts for different purposes. This is one part of being financial well-organised.

Challenges
Of course, it’s very easy to say you’ll start saving, but doing so may not be that easy.Before you start saving, you could consider what your available resources are and then set up a means to save the surplus.
However, I like the quote from the famous American investor, Warren Buffet ‘Do not save what is left after spending, but spend what is left after saving.’ It has a certain change in emphasis that may just be the necessary motivation needed to start saving. If you work from this perspective, you’ll have much more success.

What’s the difference between saving and investing?
I often hear these terms used interchangeably. When I refer to ‘saving’, I mean cash placed with a bank or building society. ‘Investing’ is used when referring to higher risk places to put your money to make it grow more than is potentially possible in cash, for example, stock & shares ISAs. Typically, investing is a long-term goal.

Further Thoughts

Need or want? – Do you need to buy that? Or do you simply want it? There is very little we truly need. Air (that’s free), food, water, warmth. All the other stuff is a choice!
Value for Money – Is there a more economical or better value alternative to what is proposed? Buying ‘the cheapest’ may be poor value and the item may need replacing sooner, which can end up costing you more. Buying ‘the most expensive’ may equally be poor value for money. Are you ‘paying for the name’?
Small Changes – The long-term can be significantly affected by what you do every day. Small changes each day can make a big difference, but you’ve got to be patient. Rome wasn’t built in a day!
What are your habits? – Get in the habit of regularly monitoring and prioritising short, medium and long-term financial goals.
Herd Instinct – Don’t feel you need to follow the herd. Herd instinct can be fatal! Just because everyone else is doing ‘such and such’ doesn’t necessarily mean it’s right for you.
Drip, drip, drip – If you’re saving regularly you should feel ‘slightly squeezed’. If you’ve got too much surplus income you won’t feel this. If you’ve got too little, you may need to cut back slightly. Be vigilant! If you can save more, do so.
Think carefully! – Can you economise in the short-term to help save more for the long-term?

Don’t get left out in the cold this winter.

A journey of a thousand miles begins with a single step – Lao Tzu.

Important Information
Please note that the above article does not constitute financial advice. The views and opinions contained herein are those of Loughtons Independent Financial Advisers and may not necessarily represent views expressed or reflected in other economic communications, strategies or funds.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited.
JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Choice & Consequence

Sat, 15 Oct 2016 09:51:27 +0000

No one likes to think that something bad will happen to them, but each year one million workers suddenly find themselves unable to work due to serious illness or injury*.

Financial Protection is designed to provide a cushion against the financial impact of unexpected and costly events such as serious illness, unemployment, accidents, and death. Despite this, there is a gap between the number of people who experience unexpected events and those who have a contingency in place to safeguard their finances.

Only a limited number of UK adults have a protection insurance safety net – such as income protection – with just one in five (17%) adults considering it a necessity – despite the same amount (18 per cent) knowing someone whose standard of life was severely impacted due to not having protection in place.

Top reasons for not taking income protection insurance include:

Can’t afford it – 28%
Not considered it – 17%
I have no one dependent on me – 11%
I would rather have the spare cash now – 10%
I don’t think I’ll lose my job – 10%

Don’t get left out in the cold this winter. To find out more, download our Guide to Protection.

Of course, there’s no substitute for taking professional advice. If you wish to take a step in the right direction with planning your finances, please feel to call us on 01626 833225 or email us at advice4u@www.loughtons.co.uk to find out more or to arrange an initial complimentary meeting.

We can also offer telephone based support as well as face to face meetings.

Sources
Research conducted by Opinium for The Money Advice Service in June 2015 amongst 2,000 UK adults. 80% of the sample were in work.
*CESI research for the ABI: ‘Welfare Reform for the 21st Century’.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Rocky road anyone?

Sun, 09 Oct 2016 11:39:15 +0000

Following the Brexit vote, Philip Hammond, Chancellor of the Exchequer has sought to reassure British businesses amid uncertainty in the wake of the vote to leave the EU.

He told members at the Conservative Party conference there may be a rocky road ahead.

No, not that rocky road!

“We are ready to take whatever steps are necessary to protect this economy from turbulence. And when the process is over, we are ready to provide support to British businesses as they adjust to life outside the EU. Because Brexit does mean Brexit and we are going to make a success of it,” he told the conference on day two.

Hammond told those gathered in Birmingham that a new “flexible and pragmatic” post-Brexit fiscal plan will be laid out in November’s Autumn Statement.

On Sunday (October 2) UK Prime Minister, Theresa May, set out a timetable for starting Brexit negotiations by the end of March, 2017.

But what do I do next?
So what are you and I to make of this when it comes to planning our finances? Well, the world is still turning and one has to ‘go out to bat’, whatever the financial weather. The saying ‘Keep Calm & Carry On’ has never been more apt. Despite the warnings of a period of upheaval, it is important to take a long term view. The instability initially felt has settled down now that the vote has passed, as politicians, investors, businesses and individuals focus on the UK’s future outside of Europe.

So for the sake of good planning and your own sanity, we suggest that you continue with your long-term plans as you would have done had we voted to ‘Remain’ on 23 June 2016. As financial planners, we are truly committed to helping you achieve your financial planning goals.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Your ISA options explained

Sun, 09 Oct 2016 09:33:10 +0000

Navigating the available options regarding ISAs can be confusing. With 6 months to go before the end of the tax year, now is a good time to look at whether you should be contributing to an ISA.

Over time the ISA allowance has increased considerably, but savings rates have dropped.

The Cash ISA & Stocks & Shares ISA allowance is currently £15,240 per person in this tax year, and it’s rising to £20,000 per person from April 2017. What’s more, to suit your aims and objectives, ISAs can be switched from previous years between Cash and Stocks & Shares options and vice versa.

So there’s never been a better time to review your ISAs and decide whether they are in the right place for your needs. To find out more, download our Guide to ISAs.

Of course, there’s no substitute for taking professional advice. If you wish to take a step in the right direction with planning your finances, please feel to call us on 01626 833225 or email us at advice4u@www.loughtons.co.uk to find out more or to arrange an initial complimentary meeting.

We can also offer telephone based support as well as more traditional face to face meetings.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Grandparents get top marks

Sat, 08 Oct 2016 16:12:59 +0000

Grandparents can make a real difference to their grandchildren’s futures by helping with the costs of education. With the cost of a 3-year university course topping £50k*, many students are starting work with large debts, or worse, could be put off going altogether.

Grandparents need not feel concerned about handing large sums to their grandchildren at a young and impressionable age. Using an appropriate structure to hold their gifts, they can combine the necessary control with a tax efficient solution to meet some or all of these education costs.

The satisfaction of giving
Many grandparents often leave money in their wills for their grandchildren. However, by making a gift during their lifetime, they can get to see the benefit it has to their family on many different levels:

They will have played their part in their grandchildren’s futures;
A financial burden on their own children will have been be lifted; and
At a personal level, they may have made significant inheritance tax savings.
The amounts for university can be substantial, particularly where there are several grandchildren. However, those grandparents who are willing and able to make such a financial commitment can obtain sufficient control over who benefits and when.

Control over gifts
Concerns about giving grandchildren too much too soon may rule out outright gifts, so by using an appropriate trust structure, those fears may be eased and provide grandparents with the control they seek. Trusts are typically flexible enough to allow any future grandchildren to also benefit. But they’re not able to invest in Premium Bonds and Junior ISAs as these can’t be held in trust.

Tax efficient investment
Control normally comes at a price, but with the right advice, that need not be the case. With advice on a suitable structure to hold the funds in, it is possible to ensure that there is no UK tax on income and gains, and any tax calculation is deferred until money is withdrawn. This can have the added benefit of not needing to file trust tax returns, providing potentially additional savings.

When funds are withdrawn, it is a simple matter of assigning the required level of funds to the grandchild (assuming they pay no or little tax), who will then be taxed on the subsequent surrender.

However, because grandchildren are unlikely to have much income as students, they will have unused tax allowances to cover any profit, which helps to mitigate a substantial, if not all the profit on any investment returns or fund gains.

School fees
If funds are needed to pay for private school fees before the child reaches 18, through a typical grandparent / grandchild trust structure, funds could be paid in the required amount from the underlying funds. The profits will then be assessed on the child, using the child’s tax allowances, so again, this is a very tax efficient method of structuring this gifting.

The cost of an education
The average fee for a private day school is around £15,000 a year and boarding school is nearly twice this (Independent Schools Council Census and Annual Report 2016).

* The price of a university education in England adds up to around £54,000 for a 3-year course at an English University taking into account fees, average living and accommodation costs (Student Money Survey 2016).

With such high costs, taking action at the earliest possible time means that any investment growth can play a bigger part in meeting these costs. From the grandparent’s perspective, any gift will be outside their taxable estate much sooner.

Taking professional advice
Like all investments, with school and university fee planning, investment returns are not guaranteed. The value of any investments can go down as well as up and you may get back less than you invested. It might not be enough to cover the fees when the time comes to actually pay them.

To ensure that you are comfortable with the risks and the characteristics of investing for your grandchild’s future, we strongly recommend that you obtain independent financial advice. We are on hand to help guide and advise you through the various options and to recommend a course of action that is suitable for you and those you want to help.

For advice related to your specific circumstances, please contact us on 01626 833225 or email advice4u@www.loughtons.co.uk

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Post Brexit Reaction

Fri, 24 Jun 2016 10:13:13 +0000

We have all had our chance to vote and have judged the benefits of an independent life outside the EU to be worth the costs of leaving it.

In spite of the more emotional appeals to the contrary, this is not a disaster. The UK will certainly suffer an economic impact as businesses consider their options, possibly even a short recession, but trade with Europe will not stop. We now have two years to renegotiate our relationship with the EU. It will be in both our interests to do so sensibly and, as an economic powerhouse, we will have a good bargaining hand.

With an open economy, strong rule of law, a functioning democracy and fundamentally pro-business policies that reward hard work, over the medium term Britain will certainly prosper.

In the shorter-term there is likely to be a period of reduced investment and lower growth. This will be until the new relationship with the EU is agreed and the progressive loss of the benefits of being a member of a large trading community is settled. A general election and a re-run of the Scottish referendum are suddenly both real prospects.

But this is not just a UK issue. Our decision leads to significantly heightened political uncertainty across Europe, which may even bring the sustainability of the Euro-Zone (as opposed to the European Union) back into question. This risk is not welcome given the current situation of global businesses, potentially impacting growth even beyond Europe’s borders.

In the markets the immediate impact will be seen today in lower share prices and weaker sterling as global investors adjust to the UK’s decision. The moves are likely to be particularly sharp as markets have recently risen in anticipation that the result would be different. Sterling will be a key instrument to watch over the near term, as movements in currency will likely determine the extent of the wider market response. The initial sentiment is likely to be negative with a fall in markets, we have seen quite a lot of weakness building already, so some of the negative sentiment will already be priced in. There will likely be a knee-jerk response, potentially followed by a rally in the market as people start to think more carefully about the wider implications of weakening sterling.

Furthermore, two factors suggest that the turbulence may pass sooner rather than later. First, growth fears should not be overblown. The UK will suffer a hit, but with governments and central banks standing by to provide support, the immediate impact in Europe should be relatively small. With the US economy still delivering solid performance and the Developing world stabilising, the picture for global growth should not change very much.

More crucially, since its weaknesses were exposed in 2007, the World’s financial system has built-up its capital reserves and it is now well braced for trouble. The suppliers of capital (banks) are not overextended, the users of capital (investors) are not complacent and the world’s central banks are fully engaged in ensuring that potential issues are averted with liquidity. In this context the potential for a single adverse event (such as Brexit) to have a domino effect is low.

Therefore, whilst the system is capable of absorbing this shock, investment portfolios will certainly not be immune from some impact. We now expect a period of heightened volatility in the short term. Longer term, the UK economy is likely to be able to handle the decision to leave the EU and continue to thrive as UK growth outlook is very optimistic. Having experienced some of the strongest growth amongst the G7 nations over the past 5 years the economy is well position to handle what lies ahead.

We would re-iterate that for medium to long term investors it is definitely the time to hold one’s nerve. It is a time for cool heads and steady hands and as we have seen in the past ‘patience will be rewarded’. Our focus as always is on fund managers that can find and invest into quality companies and who have a good handle on current economic events. Whilst understandably the volatility in global markets will have impact on short term valuations, over the long term, this approach works well in delivering efficiency and diversity within portfolios.

For clarification of any points discussed above and any future independent advice regarding your own financial planning, please do contact us on 01626 833225 or email admin@www.loughtons.co.uk

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

EU Referendum

Thu, 16 Jun 2016 09:53:03 +0000

How has the Brexit uncertainty affected the UK market?

Although the EU referendum is dominating headlines in the UK, not all stock market movements are a result of the forthcoming vote. There are also a lot of global factors affecting ours and international markets.
The year started with extreme pessimism about Chinese and global growth and further weakness in commodity prices. We then witnessed signs of a recovery in China and this in turn drove a strong commodity price rebound.
The biggest news on the UK stock market has been the resultant recovery in energy and mining stocks, which has nothing to do with the referendum.

What about the currency?

The gradual weakness in Sterling due to referendum nerves have had more of an effect on the markets. Sterling has reduced compared to the dollar, which means referendum uncertainty has actually been good news for many FTSE 100 companies, which source the vast majority of their earnings overseas.
A cheaper currency makes UK goods more attractive to foreign buyers, and more importantly in the short term, increases the value of overseas earnings.
There has been a tendency to misinterpret this, and view under performance in the markets as a direct reflection of the pending referendum. There is undoubtedly some domestic pressure, but it’s much more about the rotation into globally-facing companies.

Is there likely to be a big market move when the outcome is announced?

The EU Referendum result is hard to predict, but the market is continually moving to reflect the probabilities, and will continue to do so until the vote. That means the aftermath might be much less volatile than many expect.
It’s important to remember that a ‘Leave’ win would only trigger the start of a negotiation, and the UK would retain full access to the European Single Market while that negotiation was taking place, so there would be very little immediate difference to our terms of trade.
If sterling continued to weaken, it would mean further improvement in sterling-denominated corporate earnings and also in dividends, which had looked under pressure.
In the event of a ‘Remain’ victory, we would expect an improvement in sentiment towards domestic stocks.
Above all, we should keep in mind that the UK is a global market. You could ask what the difference would be to say HSBC’s earnings if there’s an exit from the EU? You could argue that far more important to HSBC is what’s going on in emerging markets or in global commodity markets. These big global factors won’t change, regardless of the outcome of the vote.

Therefore

As volatility continues, active management is important – Equities aren’t the only asset to consider for long term investment and generally volatility can be partially mitigated by diversifying investments across a broad range of asset classes that include equities, commercial property, fixed interest securities (bonds) and cash to spread risk even further.
For medium to long term investors it is definitely the time to hold one’s nerve and as we have seen in the past ‘patience will be rewarded’. Our focus as always is on fund managers that can find and invest into quality companies. Whilst understandably the volatility in global markets and the pending EU Referendum will have some impact on short term valuations, over the long term, this approach works well in delivering efficiency and diversity within portfolios.
We continue to assess the quality of any investment opportunities which come about as the result of our investment process and strict fund selection criteria. A long-term outlook when investing is clearly desirable, as short-term expectations can turn out to be unrealistic where events cannot be anticipated.
We will always look to ensure that our clients have a portfolio that reflects their requirements (attitude to risk and timeframe for investment) whilst taking into account what the impact the current stage in the economic recovery has on their exposure to various assets.

For clarification of any points discussed above and any future independent advice regarding your own financial planning, please do contact us on 01626 833225 or email admin@www.loughtons.co.uk

Important Information

The views and opinions contained herein are those of Loughtons Independent Financial Advisers and may not necessarily represent views expressed or reflected in other economic communications.
The comments noted above are designed to inform investors and not to persuade voters in the upcoming EU referendum.
This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Loughtons Independent Financial Advisers does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Loughtons Independent Financial Advisers has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Budget 2016 – Key Points

Thu, 17 Mar 2016 11:33:45 +0000

Pensions – no news is good news

Its business as usual for pension saving as the Chancellor confirmed there will be no imminent changes to pension tax relief. The introduction of the new Lifetime ISA (LISA) saving vehicle from April 2017 adds another complementary option to the saving landscape.

Other pension news

Salary sacrifice is here to stay: In more good news for employers and employees, the Government has confirmed that salary sacrifice will continue to be a tax and NI efficient option to fund a pension (as well as other mainstream employee benefits, such as childcare or health-related provision). Its use for other employee benefits may, however, be cut back.
Workplace pension advice allowance going up: To encourage employers to boost employee access to professional advice on their pensions, the tax and NI free allowance for employer-arranged advice will increase from £150 to £500 per employee from April 2017.
Pension dashboard coming soon: To help pension planning, a new digital pension dashboard, giving a single view of an individual’s total pension savings, will be launched by 2019.
Under 23 drawdown anomaly fixed: The current rule that requires minor dependants’ drawdown to stop at age 23 will be scrapped, giving these dependants the same flexibility as other minor beneficiaries to continue drawdown after 23.
A fairer deal for the seriously ill: Pension tax rules will be relaxed so that serious ill-health lump sums can be paid even where funds have already been accessed under the scheme. And, for payments after age 75, they’ll be taxed as income rather than at a flat rate of 45%.

LISA – a new savings option

The Chancellor unveiled plans to introduce a new Lifetime ISA (LISA) from April 2017. But this is a complimentary savings scheme for younger savers, not a replacement for traditional pension saving. Higher rate tax payers will continue to enjoy tax relief at 40% on pension savings of up to £40,000 a year, keeping pensions as their number one long term savings plan. Indeed, the under 40’s will be able to use both and add up to £45,000 pa to their retirement funds.
The Government aims to encourage long term saving with the inclusion of a ‘buy four get one free’ bonus, but with the ability for first time buyers to use savings to get a foothold on the property ladder.

How it works on the way in

The new LISA will only be available to the under 40s and will include a 25% Government top up at the end of each tax year. It won’t be possible to pay as much into the LISA as you can into your pension. Contributions will be limited to £4,000 each year which will be topped up to £5,000. And savers will stop receiving their top up once they reach age 50.
LISA contributions will count towards the total ISA savings limit which will increase to £20,000 in 2017/18.

How it works on the way out

Funds can be accessed tax free after the age of 60. But to help first time buyers, funds may be withdrawn tax free to cover the cost of a deposit on their first home. And anyone already saving in a help to buy ISA will be able to transfer their existing savings to the new LISA.
Accessing savings before age 60 for other reasons will be allowed but the Government Bonus, and the growth on it, will be lost. There will also a 5% tax charge applied on the amount withdrawn.
As with other ISA schemes, the LISA will form part of the estate for IHT.

Good news for investors as Capital Gains Tax (CGT) falls in 2016/17 – but not for landlords…

Investors who own mutual fund or shares can benefit from a CGT cut from 6 April 2016. The new rates are:
- 10% where an individual is not a higher rate tax payer
- 20% where the investor is a higher rate taxpayer, or the gain takes them into the higher rate band.
- Trustees and legal personal representatives also win, as their tax rate on trust and estate gains falls to 20%.
- However, landlords or second property owners will continue to pay 18% or 28% on any gains when they come to sell.

Income tax

In April 2017, the Personal Allowance will rise from £11,000 to £11,500 and the higher rate threshold will increase from £43,000 to £45,000.

Class 2 National Insurance

From April 2018, self-employed individuals will no longer have to pay Class 2 NICs, currently £2.80 per week. They will still have to pay Class 4 NICs, which will be reformed to allow them to build up an entitlement to State Pension and other contributory benefits.

Corporation Tax

As an encouragement to UK business, the Corporation Tax rate will be further cut to 17% from 2020. The current rate is 20%.

Here’s a reminder of what we already know is coming in 2016/17:

Lifetime Allowance cut to £1M

The pension lifetime allowance is to cut from £1.25M to £1M with new protection options for those expecting to caught.

Annual Allowance cut for higher earners

The standard £40k AA will be reduced by £1 for every £2 of ‘income’ you have over £150k in a tax year, until their allowance drops to £10k.

£5k Dividend Allowance

A new allowance will see the first £5k of dividends paid tax free. The changes also new rates of tax for dividends in excess of the allowance and an end to the notional 10% tax credit.

Personal Savings Allowance

Also from April 2016 the first £1k of interest will be tax free (£500 for higher rate taxpayers). Interest will also be paid gross so that non-taxpayers no longer have to reclaim tax deducted at source. Additional rate tax payers will not benefit from this new allowance.

Important Information

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

End of Tax Year Planning

Fri, 26 Feb 2016 18:58:45 +0000

There have been several significant changes over the last couple of years and therefore some important actions are required before the end of current tax year as well as a number of planning opportunities that will take effect from 6^th April 2016.

To help you plan; under the various headings below, we have listed just some of the individual areas that you may like to consider;

Pension funding & income planning

Have you utilised your full annual allowance?
If so when did you make this contribution, if before the 8^th July 2015, you may have a further one off allowance available?
Have you considered the use of ‘carry forward’ where possible?
Are you claiming the appropriate tax relief on the contributions that you are paying?
If you are taking an income from your pension are you aware of the potential reduced annual allowance?
If you are a higher earner are you aware of the reduced annual allowance starting in the new tax year?
If you are considering starting to draw an income from your pension have you considered the most tax efficient method appropriate?

Investment Planning

Have you utilised your full ISA allowance in the current tax year?
Have you considered utilising your spouse’s / partners or even your children’s ISA allowance?
Do you have any capital gains that you could utilise within your annual CGT allowance?
Do you have capital losses that you could use to offset other gains and / or carry forward these loses to a future year?

Inheritance tax planning:

Have you used your £3,000 annual gift allowance?
If yes, have you used last year’s annual gift allowance?
Have you used the £250 small gift allowance?
Have you made any other gifts?
Have all of the these gifts you’ve made been recorded anywhere?
Are any life policies that you hold held in ‘Trust’?
Do you keep an accurate record of your annual income & expenditure?

General Tax Planning:

At the start of the new tax year, there are new allowances that will provide potential for some additional tax free income, have you considered how to take advantage of these?
Have you made any gifts to registered Charities?
If so, make sure you keep a record of these gifts and that they are reported on your Self-Assessment tax return where applicable.

Have you visited our website recently? Click the link to see our recent changes and to subscribe to our regular updates www.loughtons.co.uk

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Residential Nil Rate Band (RNRB)

Wed, 24 Feb 2016 14:08:24 +0000

By 2020/21 families could escape IHT on up to £1,000,000 of their wealth. Each parent will have a nil rate band of £325,000 plus a RNRB of up to £175,000.
The new IHT Residence Nil Rate Band (RNRB) will be introduced in April 2017. It is in addition to an individual’s own nil rate band of £325,000, and conditional on the main residence being passed down to direct descendants (e.g. children, grandchildren).
There is the possibility of saving up to £140,000 in Inheritance Tax (IHT) if the family home passes to children on death.

How much will it be?

The RNRB will not be introduced until April 2017. It will be phased in over 4 years and the full £175,000 allowance will not be available until April 2020. The RNRB will start at £100,000 and will increase by £25,000 each tax year until 2020.
Maximum residence nil rate band
- 2017/18 – £100,000
- 2018/19 – £125,000
- 2019/20 – £150,000
- 2020/21 – £175,000
Of course these are the maximum amounts. The available allowance will be reduced if the value of the property is less than this.
For example, a father dies in 2020/21 and his will gifts his 50% share in the family home to his children. If this share is valued at £140,000, the extra £35,000 of nil rate band will go unused (but may be transferred to his widow)

When the RNRB can be transferred?

The Residence Nil Rate Band will be transferable between spouses and civil partners on death, much like the standard nil rate band. It is the unused percentage of the RNRB from the estate of the first to die which can be claimed on the second death. This is irrespective of when the first death occurred or whether they owned residential property at their death. There will always be an additional 100% RNRB unless the first spouse’s estate was greater than £2,000,000.

Tapering the residence nil rate band

Clients with large estates may not see any benefit from the extra nil rate band. The RNRB will be reduced by £1 for every £2 that the deceased’s net estate exceeds £2,000,000.
This will mean that on its introduction there will be no RNRB available if the deceased holds assets of more than £2,200,000. This will rise to assets of £2,350,000 in 2021/22 when the full £175,000 allowance kicks in.
Reliefs such as Business Property Relief and Agricultural Property Relief are ignored when calculating the value of the estate.

Who can benefit?

The RNRB is only available where the main residence passes to children (including adopted, foster or step children) or linear descendants on death. However, the rules have been extended to accommodate situations where the family home passes into the joint names of the deceased’s child and their spouse.

What if the family home passes into trust?

The residence nil rate band may be lost where, for example, the property is placed into a discretionary will trust for the benefit of the children or grandchildren.
However, some trusts for the benefit for children and grandchildren will not result in a loss of the allowance. If the trust gives a child or grandchild an absolute interest or interest in possession in the home the RNRB can still be claimed. Other trusts such as Bereaved Minor Trusts, 18 – 25 Trusts and Disabled Persons’ Trusts will also retain the additional nil rate band.

What about downsizing?

The family home doesn’t need to be owned at death to qualify. This is of help to those who may have downsized or sold their property to move into residential care or a relative’s home.
The RNRB will still be available provided that:
- The property disposed of was owned by the individual and it would have qualified for the RNRB had the individual retained it;
- The replacement property and/or assets form part of the estate and pass to descendants.
Downsizing or the disposal of the property has to take place after 8 July 2015. But there is no time limit on the period between the disposal and when death occurs.

Multiple Residences

Only one residential property will qualify. It will be down to the personal representatives to nominate which residential property should qualify if there is more than one in the estate.
A property which was never a residence of the deceased, such as buy to lets, cannot be nominated.

Basic IHT threshold frozen

While clients may be getting some additional nil rate band to set against the family home, the basic IHT nil rate band will be frozen at £325,000 until the end of 2020/21 tax year.
When combined with the full RNRB of £175,000 in 2020/21 this would provide a married couple with the promised £1,000,000 nil rate band.

Joint tenants and the trap for large estates

Some clients may miss out on the additional nil rate band by not ensuring that their estates are shared in the most efficient way.
Many clients will hold the family home as joint tenants. On the first death this means the house passes to the surviving owner with no IHT because of the spouse exemption. The RNRB is not used on the first death, with the surviving spouse inheriting the full unused allowance. But if the combined estate on the second death is greater than £2,000,000 then both RNRBs could be lost due to tapering.
Switching property ownership into tenants in common will allow each spouse to control how the property passes on death, and potentially preserve their entitlements to the RNRB by keeping each partner’s assets below £2,000,000. On the first death, the deceased could use their RNRB by leaving part of their share in the family home to their children. In turn, this would reduce the value of the survivor’s net estate. And this could be further reduced if the deceased also gives more away up to their ordinary nil rate band of £325,000. So, in total, the survivor’s estate could be reduced by up to £500,000.

Reviewing wills

It makes sense to keep wills constantly under review to cater for changing circumstances. That also includes ensuring legislative change does not adversely impact upon what the deceased would have wanted.
Missing out on the RNRB, by passing the family home into a discretionary trust; for example, could see their executors paying as much as an extra £140,000 in inheritance tax.
A deed of variation may come to the rescue for some where property is passed to an individual.
However, it can be near impossible to vary a transfer into a discretionary trust which has a wide class of beneficiaries as agreement will be needed from all possible beneficiaries.

Important Information
Please note that the above article does not constitute financial advice.The views and opinions contained herein are those of Loughtons Independent Financial Advisers and may not necessarily represent views expressed or reflected in other economic communications, strategies or funds.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Making Cents Investments in Start-ups become profitable for Companies …

Mon, 15 Feb 2016 18:30:37 +0000

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Making Cents Investments in Start-ups become profitable for Companies …

Mon, 15 Feb 2016 18:30:30 +0000

Making Cents Investments in Start-ups become profitable for Companies …

Mon, 15 Feb 2016 18:30:19 +0000

‘Time in the Market’ or ‘Timing the Market’?

Mon, 15 Feb 2016 08:59:00 +0000

With over 90 years of combined experience of financial planning & investing, we consider that it is very difficult and most likely impossible to predict when is the best time to enter or exit the market. The speed at which markets react to news means stock prices have already absorbed the impact of new developments. Those trying to time their entry and exit into markets may actually miss the bounce. Missing out on just the 10 best days in the market since 2002 will have left your investments in negative territory.

When in the midst of the market noise, logic and common sense are hard to find. History and statistics show us that the most important part of investing is to be invested. This requires patience and it is often difficult to retain one’s patience in the midst of such turmoil.

Statistics tell the story for themselves. For example, if we look at the S&P 500 over the period from the start of 1995 to the end of 2014, we then have a period of investing covering some 5,036 trading days. During that time if I had invested $10,000 from the start I would have had an annualised return of 9.85% providing me with a perfectly healthy profit of $55,475.13. However, if I managed to miss just the best 5 days out of 5,036, my profit would reduce by 39.73% to just $33,435.75 – a difference of $22,039 for just 5 days!

If we expand the number of missed days to 40 we see the point exaggerated still further. In fact instead of just making less profit, I would actually make a loss and I wouldn’t get all of my original money back, just $9,143.46 or a loss of $856.54.

If we reverse the situation. Supposing I had managed to miss the worst days during that time, what would have happened to my $10,000? Well if I had missed the 5 worst days my annualised return would have leapt to 12.24% resulting in my $10,000 giving me a profit of $90,688. Then to balance out the figures, I should also show you the effect of missing the worst 40 days out of 5,036. In this case my annualised return would have risen to 22.19% and my profit would have risen to an astonishing $540,011.

However, of course we have no means of knowing when such days are ever going to be and thus unless you are willing to believe the market soothsayers, common sense would tell us that the old market rhyme is still correct –“it’s not timing the market, but it’s time in the market”.

So when you look at markets today, and after such a long period of recovery from the financial crisis, it would be very easy to convince yourself to sell out of fear, whereupon you would promptly find that you missed one of the key positive days that are so vital for longer term returns. Then of course you have the problem of trying to time the entrance back in again. So when is the best time to invest? Well probably now, or even in tranches of “now’ – but not later.

Implications for Investors?

Markets will remain volatile and investors should ensure that their investments remain suitable for their circumstances and hold enough cash for any rainy day needs. Those who are accumulating money could consider adding to portfolios when markets are lower. Those decumulating from their capital, for example when drawing an income, need to look carefully to guard against drawing down too much of their capital and eroding the underlying capital base. It is also essential to make use of tax allowances especially as these are constantly under review by the government. Experience tells us that our own human emotion is the biggest threat to our own portfolio. Investment decisions based upon emotion are nearly always wrong!

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

Economic Update – The Challenges for UK Investors

Fri, 12 Feb 2016 12:23:29 +0000

Key considerations for investors:

Interest Rates have been so low for so long now although the US Federal Reserve has made the first move by raising rates in December 2016. When will be the next increase? Whilst it is intimated that the UK is someway off the US rises, it could be sooner if the UK economy continues to strengthen.
The Bank of England is considering if an increase in interest rates will strengthen the pound which will make it even more difficult for manufacturing and export sectors to contribute towards our economic growth. A recovery driven by UK consumers is good, but a more balanced recovery will be better in the longer term.
Consumer Spending in the UK is robust and wages continue to grow (growing at 3.5% in the private sector) as the labour market tightens as unemployment is down to 5.3% (Dec 2015). The ‘living wage’ will have an impact from 2016 as inflation remains low. Consequently the UK Economy continues to perform well given the tough global conditions.
Oil Prices have fallen by more than 65% in the last 18 months. They could well stay low for some time and therefore oil producers will struggle as their cash flows will be affected. There are some benefits, most notably in the travel Industry where these lower prices are either passed onto the consumers or benefit the bottom lines of the travel companies.
Emerging Markets have been slowing down and the focus of growth is switching from Infrastructure to consumption, which is particularly the case in China. An increasing interest in travel in Emerging Markets is a by-product of rising wealth and with low oil prices should benefit the travel companies.
Lower oil prices are also likely to lead to a reduction in surpluses of oil exporting countries. This reversal in global savings could put even more upward pressure on global interest rates.
EU Referendum. It is difficult to predict the timing or the outcome and it does create some uncertainty and the effect on Sterling. Markets will prefer the certainty of ‘status quo’ and not leaving the EU, but time will reveal the full effect of the proposed referendum.

Financial Market Outlook:

Developments in China and a collapsing oil price appear to be the cause of a turbulent start to 2016 in financial markets. However, it is expected that Equity markets will show signs of more stability as investors acclimatize to the current economic issues. Notwithstanding this volatility will persist for some time.

Our Approach:

As volatility continues, active management is important – Investors must proceed with caution. Equities aren’t the only asset to consider for long term investment and generally volatility can be partially mitigated by diversifying investments across a broad range of asset classes that include equities, commercial property, fixed interest securities (bonds) and cash to spread risk further.
For medium to long term investors it is definitely the time to hold one’s nerve and as we have seen in the past ‘patience will be rewarded’.
Our focus as always is on fund managers that can find and invest into quality companies. Whilst understandably the short-term noise from China will have some impact on short term valuations, over the long term, this approach works well in delivering efficiency and diversity within portfolios.
We continue to assess the quality of any investment opportunities which come about as the result of our investment process and strict fund selection criteria. A long-term outlook when investing is clearly desirable, as short-term expectations can turn out to be unrealistic where events cannot be anticipated.
We will always look to ensure that our clients have a portfolio that reflects their requirements (attitude to risk and timeframe for investment) whilst taking into account what the impact the current stage in the economic recovery has on their exposure to various assets.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised and regulated by the Financial Conduct Authority.

The New Dividend Tax Take

Thu, 10 Sep 2015 07:26:55 +0000

During the 2015 post-election Budget, Chancellor of the Exchequer George Osborne announced that he would be establishing a new dividend tax.

Why the change?

Under the current system, any dividends received up to the basic rate income tax band (20% band is currently £31,785 on top of the £10,600 or £10,660 personal allowance) would not be subject to any further income tax.

This was presented by the Chancellor under the ruse that the current system of dividend tax credits was complex and antiquated. Our view on this is that if it is antiquated and complex, do away with the 10% tax credit and leave the current tax collection levels unchanged.

How will the new tax work?

However, George Osborne has used this argument to introduce a new tax on dividends received in excess of £5,000.

The first £5,000 of dividend income in each tax year will be tax-free. Dividend income above that will be taxed at 7.5% for basic-rate taxpayers, 32.5% for higher-rate taxpayers and 38.1% for additional-rate taxpayers. The new tax takes effect from 6^th April 2016.

Tax will not be deducted at source and taxpayers will have to use the self-assessment reporting system to pay any tax due.

Impact upon Individuals

This will impact on those whose retirement incomes are partly or fully made up of dividend income and quite a few people I have spoken to are completely unaware of the effect this new tax will have on their own circumstances.

How does this differ from the current system?

Under the current system, basic-rate taxpayers have no further liability to tax on dividend income. Higher-rate taxpayers pay an effective rate of 25% of the net dividend while additional-rate taxpayers pay 30.56% of the net dividend.

So effectively, taxpayers in all tax bands currently pay less tax than they do on earned income. We must remember that dividends are paid out of company profits which have already been taxed at corporation tax levels.

There you have it – Double Taxation!

Examples

On 17^th August 2015, HMRC issued a ‘Dividend Allowance Factsheet’ which provided a few examples of how this will work. Unfortunately it was not that informative in my opinion and may confuse rather than clarify. You can decide yourself by visiting the link – https://www.gov.uk/government/publications/dividend-allowance-factsheet/dividend-allowance-factsheet

How does the £5,000 Dividend Allowance Work?

Example 6 of the ‘Dividend Allowance Factsheet’ is an interesting case in point. It is illustrated as follows (based on 2016/17 tax allowances and thresholds):

Example 6

‘I have a non-dividend income of £40,000, and receive dividends of £9,000 outside of an ISA’

Of the £40,000 non-dividend income, £11,000 is covered by the Personal Allowance, leaving £29,000 to be taxed at basic rate.
This leaves £3,000 of income that can be earned within the basic rate limit before the higher rate threshold is crossed. The Dividend Allowance covers this £3,000 first, leaving £2,000 of Allowance to use in the higher rate band. All of this £5,000 dividend income is therefore covered by the Allowance and is not subject to tax.
The remaining £4,000 of dividends are all taxed at higher rate (32.5%). The effective level of tax is therefore £1,300.

Where this dividend allowance of £5,000 had been applied genuinely as an allowance, the tax position could have been as follows:

£3,000 of excess would have applied at the basic rate and £1,000 would have applied at the higher rate, so the effective tax levels would have been £550, a saving of £750!

This is a subtle application of the ‘allowance’ by the politicians.

Remember too that the dividends have already been taxed at corporation tax levels!

Of note is that under the current system, the tax payable on the dividends would have been £1,000!

Who will pay more?

Whilst many will pay more, including basic-rate taxpayers who receive more than £5,000 in dividends, there are others, such as higher-rate taxpayers with £5,000 or less in dividend income, who will gain, as they currently pay tax of 25% on the whole sum (or £1,250), while under the new regime there will be no tax to pay, thanks to the £5,000 allowance.

Dividend Income within my tax-free personal allowance?

Dividend income is still eligible for the personal allowance. So if next year you had £16,000 in dividend income, the first £11,000 would be covered by the personal allowance and the other £5,000 by the new dividend allowance. As a result, no tax would be payable.

How does this affect dividends within ISAs?

The tax credit currently applied to dividends within ISAs is notional and cannot be reclaimed.

For example, a company declared a dividend of (say) 90p from its (already taxed) profits. This was ‘grossed up’ to 100p – using a notional process under which no money changed hands. When the dividend was handed over to shareholders it was ‘netted’ back to 90p, along with a ‘tax credit’ that meant a basic-rate taxpayer had no further tax liability.

Under the new system, the notional grossing up and netting down will be abolished and shareholders both within and outside of ISAs will continue to receive 90p under the new system. Inside ISAs nothing will change; outside them the new tax outlined above will apply.

How does this affect dividends within Pensions?

All pension plans, whether occupational or personal, were also unable to reclaim the ‘tax credit’ so nothing will change to the dividends they receive. Any dividends received won’t be taxed while they remain in the pension but remember that pension income is taxable in line with existing rules when withdrawn by the pensioner. The £5,000 allowance will not apply because the recipient of the dividend income is the pension scheme, not the pensioner.

How do I minimise the effects of this new tax?

Firstly, you could hold investments within an ISA and make full use of your ISA allowance in each tax year. The importance of this can often be missed by investors. Year-on-year this can make a big difference.

Remember however, that when transferring investments into ISAs, the investments are sold and then bought them back within the ISA. Be careful, as capital gains tax or income tax on chargeable gains may apply in certain circumstances. You should therefore take independent financial advice before undertaking this.

Where your dividend income is currently less than £5,000, it would still be advisable to use an ISA because your dividend payments could rise in future.

Business owners (Directors) who are paid by combination of salary and dividend may want to draw as much as possible in dividends before the new rules took effect in April next year.

Future changes

It remains to be seen how the public will receive the new tax changes when they actually start impacting on individuals. Some have called the £5,000 allowance derisory and others have seen this as a hit on company directors who take the risk of running a business and where the current regime was seen as a reward for that risk.

This may be just the start and George Osborne or his successor may very well seek to manipulate the rate of tax payable on dividends to the benefit of the Exchequer. Watch this space.

If you would like to know more about how we add value when advising you based on your own circumstances, please contact us on 01626 833225.

Please note that the above article does not constitute financial advice.

Financial Markets Update

Fri, 04 Sep 2015 07:41:18 +0000

Given the current theme of global stock market volatility caused largely by the issues that exist in the Far East, we are providing a brief update addressing the current market volatility and the likely effect on your investments.

Current Market Volatility

There are concerns over market volatility in recent weeks, with the lack of a single clear trigger making it harder to assess the potential for this volatility to be sustained.
The fluctuations we have seen in the past couple of weeks are a concern in the shorter term, but the overall outlook for equities remains positive. For tactical investors, there could be some opportunities to buy equities in the coming days, but this is risky business and most savers should remember that diversification remains key for riding the bumps of stock markets over the long term

What’s causing volatility in equity markets?

There are a number of forces driving these fluctuations:

The devaluation of the renminbi, (Chinese currency) triggered a sell off of emerging markets (EM) assets. This negative sentiment has also affected the developed markets.
Broader fears over China have certainly impacted emerging markets, which also face pressure from US dollar strength and the prospect of the Federal Reserve rate rises – as well as the recent slump in commodity prices.
Also, thinner markets during the summer holiday period mean that movements can be amplified by low liquidity, and there’s likely an element of this here.

The outlook for global equities remains positive

Despite the panic of recent weeks, the outlook for the world economy has not significantly changed. From a fundamental perspective, the low growth/low inflation situation remains and is broadly supportive of equities.
Loose central bank policy supports this picture, particularly in Europe and Japan, and, while we are all waiting for the ‘Fed’ to increase interest rates this may not happen until the end of the year.
However, risk remains. The pace of China’s slowdown has brought some surprises, and continues to impact commodity prices overall. However, the transition to a more sustainable, consumption-driven model of growth has been happening for some time.
While China’s export and manufacturing sectors are struggling, its service sector continues to expand and become more important. None of this structural transition was ever going to be a smooth ride, and its impact on both developed and emerging markets will continue to be felt.
On top of this, ongoing concerns around the ‘Fed’ and the prospect of higher interest rate rises are likely to sustain pressure on Emerging Market assets. This could affect the vulnerable countries such as Brazil, Russia and South Africa more.

As Volatility continues, active management is important

In recent weeks, many ‘active equity managers’ have begun to add to risk assets. Indicators traditionally suggest that now is a good time to increase equity exposure, given the mood in markets, more attractive valuations and unchanged fundamentals.
However, investors must proceed with caution. Jumping into equity markets can backfire, and indeed equities aren’t the only asset to consider. Investors can help mitigate volatility in their portfolios over the longer term by diversifying their investments across a broad range of asset classes that include equities, commercial property, fixed interest securities (bonds) and cash to spread risk even further.
While we have seen equity markets fall in recent weeks, bonds have performed relatively well, and the traditionally negative correlation between these asset classes can help protect a portfolio from volatility.
We at Loughtons will continue to ensure that client’s portfolios are well diversified in accordance with the agreed tolerance for risk and the timeframe for investment.

As you see the current situation cannot be ignored or overlooked, but we believe it is a ‘correction’ in the markets and indeed the medium to longer term view is still very positive.

If you would like to know more about how we add value when advising you based on your own circumstances, please contact us on 01626 833225.

Please note that the above article does not constitute financial advice.

Global Economic Outlook

Wed, 01 Jul 2015 13:59:48 +0000

With a weak start to the year and a modest rebound in April it is expected to be another year of below trend global growth. Consequently the end of year forecasts are slightly below last year’s 2.7% (GDP based on current fixed exchange rates).

Having said that, despite the US economy’s quarter ‘1’ contraction, recent data and surveys indicate a more robust consumer-led rebound is underway.

Growth is slow in the Eurozone, but improved economic conditions should allow a faster pace of growth to be sustained by year end.

Although UK Quarter ‘1’ GDP was unrevised at 0.3% per quarter (1.2% per annum rate), estimates now reveal potential healthy growth in final domestic demand driven by business investment.

Following several months of continuously disappointing economic reports, estimates for Japan reveal Quarter ‘1’ GDP was reported at a far stronger 3.9% per annum growth rate. It is thought that this pace will be difficult to sustain for the remainder of the year and the full year estimate is 0.9%.

Recognition of the need to stabilise and then stimulate growth in the Chinese economy has resulted in the authorities injecting further fiscal and monetary policy support. The 7% GDP growth target appears increasingly ambitious though.

Emerging markets are still suffering from economic slowdowns in China and the US and recessions in Russia and Brazil. Parts of Asia have succumbed to slower growth also with many countries revising lower growth figures for the end of 2015.

Previously deflation worries are now giving way to inflation concerns, especially in the US and Eurozone following recent rebounds. Core inflation forecasts in most major countries have remained fairly steady and this provides a much clearer guide to underlying inflationary trends.

Financial Market Outlook

As US economic data has improved it is thought that September 2015 will be the date for the first interest rate rise with 0.25% rises now priced-in for each quarter thereafter through 2016.

Interest rate rises in the UK is likely to be delayed until Quarter ‘1’ 2016 while, in the Eurozone, quantitative easing has only just begun.

There is volatility in fixed income markets, particularly in main market government bonds. Corporate Bonds still offer moderately better value than governments at present.

UK commercial property capital value growth has decelerated. But this is a slowdown not a downturn and underlying conditions should show further capital and rental growth.

With the equity bull market cycle maturing, investors must expect more volatile equity markets. Some uncertainties could undermine shorter term returns and a correction in the markets is a possibility. However, the global backdrop shows signs of future success and market indicators suggest we have not yet reached the top of the equity market.

Japan and Europe are preferred areas for investment on a medium term view. However, Europe is very much dependant on finalising the bail-out deal with Greece and if this is not favourable volatility in markets could be experienced.

If you would like to know more about how we add value when advising you based on your own circumstances, please contact us on 01626 833225.

Please note that the above article does not constitute financial advice.

Congratulations Lucy!

Mon, 29 Jun 2015 11:38:47 +0000

Many congratulations to Lucy Loughton, who has qualified to practice as a financial adviser.

Lucy passed her final exam to achieve the CII’s Diploma in Regulated Financial Planning at the end of May 2015.

Peter Blackburn, Director of Loughtons IFA said “This is a tremendous effort by Lucy and the result of 2 years of hard work. Lucy has a bright future and a very promising career ahead”.

Lucy will now be seeking to continue her studies towards Chartered Financial Planner status.

Defined Benefits or Defined Contributions Pension Schemes

Thu, 12 Mar 2015 12:31:49 +0000

Defined Benefits (DB) or Defined Contributions (DC) Pension Schemes

In the popular press, ‘final salary’, also known as ‘defined benefit’, pensions are often referred to as ‘gold-plated’, the implication being that they are superior to ‘defined contribution’ (money Purchased) arrangements such as Personal Pensions.
Many therefore can dismiss the notion of doing anything with a Defined Benefit pension other than keeping the annual benefit statements safe and waiting until the scheme retirement age. For many people, there is nothing wrong with this, and the Defined Benefit pension will provide a solid foundation of index-linked income in retirement, free from any headaches about fund performance, the need for annual adviser reviews or concerns about market volatility.
However, for a significant number of people, with particular goals, personal circumstances and appropriate attitude to risk, a transfer away from a Defined Benefit pension to a Defined Contribution arrangement can be an extremely beneficial exercise.
We list below a list of considerations which should not be ignored:-

Defined Benefits (Final Salary) – Pros

A known & index linked income in retirement
Guaranteed death benefits (income) for spouse / dependants
No worries about investment fund performance
No concerns about market volatility
No need for ongoing advice / reviews

Defined Benefits (Final Salary) – Cons

(And therefore why a Defined Contribution arrangement may be more favourable)

Flexibility & Choice – Set income & Pension Commencement Lump Sum (PCLS) at outset may not be required
- May be planning phased retirement / winding down / part time
- Therefore could create an unfavourable tax position
Control of underlying assets – DB scheme investment may not match appetite for risk / capacity for loss of the member
- Therefore DB scheme is not invested in a bespoke investment portfolio that may be required
- DC scheme is especially attractive for longer term investors with greater appetite for risk & possibility of greater fund growth
DC scheme will allow 25% to be paid as PCLS / DB scheme possible will be unable to match that level
One off PCLS will be added to the estate for Inheritance Tax (IHT) purposes
If in poor health – transfer to DC arrangement & securing impaired life / enhanced annuity may be beneficial
If single / widowed / divorced – member may not want death benefits as part of retirement package
DB scheme death benefits may be low in relation to the Cash Equivalent Transfer Value (CETV)
DB scheme does not allow spouse to draw inherited benefits & potential for remaining fund to be passed to non-dependent children / future generation

There are many aspects to consider and often an interplay between all of one’s financial arrangements.

If you would like to know more about how we add value when advising you based on your own circumstances, please contact us on 01626 833225.

Please note that the above article does not constitute financial advice.

Pension & ISA Changes

Sun, 08 Mar 2015 19:03:04 +0000

You are no doubt starting to see a lot of press regarding the proposed pension legislation and enhancements to ISA investments as we head up to the 6th April 2015. Naturally there are concerns and questions being asked, especially in the media and there are those that feel that the government are looking for short term tax revenues at the expense of a longer term drought of pension income.

Notwithstanding this, there is much flexibility being offered to people with all sizes of pension fund and it is our thought that for those that take care to manage and review their retirement arrangements and take appropriate advice, there are large benefits from this much enhanced flexibility, which not only includes how you draw your pension income in the future but how you pass down your pension funds to your nominated beneficiaries upon death in a very tax efficient manner.

These Pension Freedoms are largely being aimed at those with ‘Defined Contribution’ (Money Purchased) pots as opposed to those in Final Salary (Defined benefits) schemes.

Please see the main bullet points below detailing the main changes / enhancements. Some will and some will not relate to you.

Pensions Freedoms
Flexi-access Drawdown (FAD)

All new Pension drawdown plans from 6 April 2015 will be flexi-access drawdown (FAD).
25% tax free cash can be taken from designated drawdown fund and then there are no limits on income levels.
Balance can remain invested, or paid as a lump sum, or used to provide flexible income. A person’s marginal rate of income tax will apply on any of the above combinations. (Subject to available Lifetime Allowance)
Once any income taken, £10,000 money purchase annual allowance applies i.e. the amount that you can save into pensions each years (pension input period).
Pre April 2015 flexible drawdown arrangements will automatically become FAD.

Existing Capped Drawdown

No new capped drawdown arrangements can be set up post April 2015.
Existing plans can remain in place and continue with reviews and Government Actuarial Department (GAD) limits.
Can convert to FAD on member’s request.
Automatically convert to FAD if your income in future exceeds 150% GAD.
You can retain the standard £40,000 annual allowance where income remains within GAD limits i.e. the amount that you can save into pensions each years (pension input period).

Uncrystallised Funds Pension Lump Sum (UFPLS)

For those who want to draw everything out of their ‘pension pot’
Lump sum drawn directly from uncrystallised money purchase pensions.
25% of the lump sum is paid tax-free.
The balance of the lump sum is taxed at the member’s marginal rate of income tax.
Once a UFPLS is taken, the £10,000 money purchase annual allowance applies.

Death Benefits

The key to new rules is distinction between deaths pre and post age 75.
No longer a distinction between crystallised / uncrystallised, or dependant / non-dependant benefits.
Pre age 75 benefits to a nominated beneficiary are free of all tax – lump sum or income.
Post age 75 drawdown income payments to a nominated beneficiary – subject to income tax at beneficiary’s marginal rate. There are no restrictions on the level of withdrawals.
Post age 75 lump sum death benefits in 2015/2016 will be taxed at 45%.
Post age 75 lump sums from 2016/2017 will be taxed at the beneficiary’s marginal rate.
Similar treatment applies to annuities for pre and post age 75 situations.
The nominated beneficiary can pass any unused drawdown funds onto a successor on their death. The same tax treatment will apply, also depending on the age at death of the beneficiary.

ISA

ISAs will retain their tax-free status when passed on to a spouse or civil partner following death.
It is the ISA allowance that is passed to the surviving spouse or civil partner when the ISA saver dies which will equate to the value of their ISA holdings at the date of death.
The annual ISA subscription limit for 2015/2016 rises to £15,240 from £15,000, in line with movement in the Consumer Price Index (CPI).
The limit can be invested wholly in cash, stocks and shares or any combination between the two.
Savers aged 16-18 can subscribe up to £15,240 into a cash ISA in 2015/2016 but are not permitted to open a stocks and shares ISA.
A saver may only open a maximum of one cash ISA and one stocks and shares ISA each tax year.

ISA versus Pensions

Pensions will, like for like, outperform ISAs in the majority of scenarios.
This is largely due to a combination of tax relief on contributions and the ability to take a quarter of the fund tax free.
ISA’s will have the upper hand if access is needed prior to age 55 or if accessing pension in one go then marginal rate tax may be punitive.
However, anyone with sufficient allowances and receiving tax relief at 40% on pension contributions will be in a better in position in a pension regardless of how much tax they pay on the way out.
If you factor in the new pension death benefit rules and the case for pensions becomes even stronger.
Consequently, pensions ought to be the default saving choice and moving existing savings into pensions in the run up to retirement should always be considered.

If you would like to know more about how we add value when advising you based on your own circumstances, please contact us on 01626 833225.

Please note that the above article does not constitute financial advice.

Short Term Risks for Long Term Rewards

Thu, 16 Oct 2014 07:37:41 +0000

Global Stock markets have dipped significantly in the past few weeks as fears over global economies and falling inflation hit shares and drove up bond prices. Reports of the slowdown in growth in the US, disappointment over the health of the economy in Europe, concerns about a slowdown in Asia, as well as the threat of the Ebola virus and ongoing concerns in Ukraine and Syria are all hitting investor confidence driving down recent positive sentiment and improved outlook.

There is also political turmoil in the heart of Europe, as investors look ahead to the end of Quantitative Easing at the end of this month, and see very little evidence of a balancing factor to mitigate the end of monetary stimulus from central banks and falling prices.

Combined with these concerns about economic and political paralysis at the heart of Europe, Germany combats French and Italian demands to give the European Central Bank a free rein. This has raised the prospect that Europe’s economic growth could well be sub-par for years to come. A fact reinforced by the recent growth downgrades by the IMF and OECD of the European economy and more recently by the German finance ministry of the German economy, which is the anchor around which all of Europe has pivoted.

The effect of these issues have driven down global stock markets in the last few weeks and driven up the price of safe-haven sovereign debt, thus reducing the yields on UK gilts, German bunds and US Treasuries.

One of the main risks for investors is withdrawing from the markets at the wrong time. Time in the markets not timing the markets should continue to be a priority for investors. Furthermore, it is well worth remembering that our clients like many other investors have all diversified their investments amongst various asset classes broadly; Cash, Fixed Interest, Property & Equities, and whilst in the short term will see the value of their investment portfolios drop, this will not be to the same extent as the stock markets generally.

None of these events will surprise or shock investors who have set out a strategy of investing over the medium or longer term in order to deliver the objectives of their financial plan. Investors will be rewarded for maintaining the risk within their investments. They will see value in stock prices, particularly in stocks where businesses are in a position to get through this difficult period of the economy in good shape, and where they have rising cash-flows, earnings and dividends. Therefore there remains a significant upside on a three-to-five year view. Investors who do not currently need cash may wish to look at the longer term, and take advantage of these depressed prices, as we look to higher equity values in months and years to come.

Comment – Pensions Guidance

Thu, 24 Jul 2014 07:17:39 +0000

The Chancellor of the Exchequer, George Osborne, has announced this week that ‘Everyone who will be able to take advantage of the new reforms will be able to access free and impartial guidance’ with respect to their retirement options.

This was previously announced by the Chancellor to the House of Commons in his budget statement on 19 March 2014.

The BBC and other news media have quoted the Chancellor as confirming that those people approaching retirement would receive advice. This is not the case.

The Money Advice Service (MAS) & The Pensions Advisory Service (TPAS)
It has also been revealed that the bodies chosen to provide the guidance will be the Pensions Advisory Service and the Money Advice Service. This is the same Money Advice Service that the government has agreed to an independent review of, following concerns by the Treasury Committee into the role that the Money Advice Service plays and whether it is at all effective. Indeed there are concerns as to whether it is fit for purpose.

So I will get free advice right?
Great, so people no longer need to pay to receive financial advice at retirement. Right?

Wrong!

As ever, the devil is in the detail. When speaking to the BBC recently, the Chancellor was very careful with his choice of words. He used the word guidance rather than advice. There is a very significant difference.

Whilst this sounds like a great headline, and it certainly is easy for the Chancellor to deliver a nice simple sales pitch, what does this actually mean and how did this situation come about?

HM Treasury
Following a consultation, it was decided by HM Treasury that this guidance would not be provided by product providers. You know the ones, those companies that are sometimes perceived to charge lots of money to deliver a service that is much maligned by and delivers poor value to consumers.

HM Treasury wanted the guidance provided by an independent and impartial body or bodies.

Now, here’s the important bit….
The guidance proposed by the Chancellor will only sound out peoples options at retirement. The guidance will not provide specific recommendations as to what is suitable for an individual to do in their own circumstances.

If we use the supermarket as an analogy, it’s the equivalent of having someone tell you what is available to buy when you enter the supermarket. This is a far cry from someone advising you what you should be buying & eating in your own circumstances, dietary & health needs.

So how will this work in practice?
At this stage, further work needs to be done by the government and the bodies granted the role of delivering this guidance before we will really know.

It’s free right?
Nothing is free. Free just means something is paid for in a different way.

It is proposed that this service will be paid for in part by a levy on financial advisers. Financial advisers will in turn have to charge their clients.

To say that this seems inequitable would be an understatement. Is the government next proposing that doctors pay for the drugs they administer to their patients or that teachers buy the books to read to their pupils?

What do you think?

Once someone has received their free guidance what do they do next?
That remains unclear until further work is done by the bodies tasked with delivering the guidance have formulated a plan of action. However the range of outcomes could be as follows:

Consumers don’t bother with the guidance and seek advice from an authorised independent financial adviser
Consumers receive the guidance and then make their own mind up and proceed to advise themselves
Consumers receive the guidance and then seek advice from an authorised independent financial adviser

The Chancellor certainly feels that people can then make their own mind up as to how they access their retirement benefits.

Pensions are simple right?
Let’s be clear, pensions are very complicated.

For a member of the public without initiation into the rules and complication involved in pensions, getting to retirement and actually receiving some income will be nothing short of wading through a minefield.

For the Chancellor to say that people can make their own mind up indicates that he either feels the process is much simpler than it is or that people have much greater knowledge than they do.

It may be that in the simplest of cases people feel they can make their own mind up. However…

Connections
Providing true financial planning is never one isolated transaction after another. I’m not talking about people selling financial products (that’s not advice), I’m talking about true financial planning.

Everything is connected.

Decisions that we made 20, 30 or 40 years ago can affect how we plan today. Decisions that we make today can affect the generations to come.

When we undertake advising our clients, many questions will arise including some of the examples below:

Do I need to save and if so, how much should I save?
Do I pay extra off my mortgage?
Should I buy that house?
What is investing? Why bother?
Should I invest? And where?
Should I be buying life insurance? What’s the point?
What happens if I’m ill?
What tax planning do I need to undertake?
How much cash should I keep for emergencies?
How should I structure my business? What difference does it make?
If I draw my pension now what would that mean in the future?
Should I be looking to invest into ISAs or pensions? What’s the difference?
Will I have enough money or will I run out?
What is the impact of inflation now and in the future and why is this important?
How much can I draw from a pension now so as not to run out of money later on?
When can I start drawing my pension?
When should I start drawing my pension?
When can I retire?
When can I afford to retire?
What happens if I go into care?
Can I afford to help my children financially? What is the impact on me?
Do I need to consider trust planning?
Should I make a will?
How can I leave my estate to my family whilst ensuring that I have enough to live off?
What should I be doing about inheritance tax?
What’s a lasting power of attorney and do I need one?
What are the implications of a combination of these options for me?
What happens if my circumstances change? How will this affect things?

And so on and so on…

Who provides Advice?
Where a consumer seeks advice from an authorised financial adviser, that adviser, as part of their service, is likely to go through the range of options in great detail to ensure that the recommendations made to that consumer are suitable for them.

This will mean that the guidance will be a duplication of what advisers do as a matter of course.

Let’s be clear – Financial advice is the sole preserve of regulated financial advisers.

Keep calm and carry on!

—

If you would like to discuss your own circumstances or wish to make a positive difference to your own finances, please feel free to call us on 01626 833225 to find out more.

Please note that the above article does not constitute financial advice.

Bank of England Quarterly Inflation Report – 14th May 2014

Wed, 14 May 2014 16:44:41 +0000

Today, the Bank of England (BoE) released its latest quarterly Inflation Report, which updates its projections for inflation and the wider UK economy. Overall, the report did not make significant changes to either the Bank’s inflation forecasts or its expectations for UK economic growth. It did, however, reflect on market expectations that the UK interest rates might rise before the end of the year.

Furthermore, the UK monthly labour market report, which outlines unemployment in the UK as well as other labour statistics, such as wage growth was issued and confirms:

UK labour market remained strong with unemployment dropping from 6.9% to 6.8% in the three months to March, which was in line with market expectations. The number of people in employment rose to 30.43 million, the highest level since records began in 1971.
Wage growth in March came in significantly below expectations at 1.7% (year on year). Markets had been hoping for a 2% rise, with much of the shortfall being generated by weaker-than-expected private sector growth. The BoE, however, forecast that wage growth will begin to rise towards 2.5% at the end of the year.

Previously, some were predicting that the Monetary Policy Committee (MPC) would use the labour report to confirm interest rate expectations currently built into market prices, which see the first rate rise happening between November 2014 and February 2015. This is not what happened.

The Bank’s forecasts do now suggest that inflation will be slightly above target in two-to-three years’ time, on the assumption of unchanged policy. The implication is that rates would need to rise, modestly, in 2015 for the Bank to have a better than 50-50 chance of staying on target. That is a change from the last Inflation Report, in February, but not a very consequential one. Literally no-one expects the base rate to remain at its current record low of 0.5% until 2016, and even the forecast on unchanged policy only suggests that the CPI measure might rise to just under 2.4%.

Investment Implications
Investors are right to prepare for the first rate rise in the UK, which currently looks set to happen before the first official interest rate rise in the US. But today has shown that the markets have got a little ahead of themselves in pricing in a rate rise at the turn of the year. We don’t think the MPC would hesitate to raise interest rates before the General Election in May 2015, if the economic data seemed to demand it. But neither is it going to be forced down this path by the sheer weight of market expectations. It’s worth noting that the Bank’s governor, Mark Carney, also issued a timely warning to investors regarding the current very low levels of market volatility. As the economy – and policy – start to move towards normality, he said investors should expect volatility to get back to normal as well.

Emerging Markets – Buy or Sell?

Fri, 11 Apr 2014 13:01:07 +0000

2014 is likely to be a year of transition for both the developed and the emerging world. In the developed economies, there are somewhat tentative signs that economic recovery is gathering pace with monetary policy in the United States becoming less available. This is the so-called tapering process. In the emerging world, by contrast, economic growth has been slowing, in particular the domestic part of some economies. The tapering process in the US has weakened some emerging market currencies and has challenged policy makers to tighten monetary policy in order to combat both inflation and capital outflows. Against this backdrop, developed world equity markets have seen significant inflows and have rallied strongly. Emerging equity markets, however, have been weaker with outflows and currency depreciation.

Emerging Economies generally had a difficult 2013 with slowing world trade and abrupt corrections to their equity, bond and currency markets following the US decision to taper. The economies most seriously affected were those that had allowed money and credit growth to expand the most in the preceding three years and consequently had built up the largest current account deficits – economies such as Brazil, India, Indonesia, Turkey and South Africa, also known as ‘the fragile five’. Their recent lack of discipline means they now need a period of monetary and fiscal tightness before their economies can regain momentum in late 2014 or 2015. The outlook for 2014 is better in those emerging economies that maintained the discipline, but even amongst these they are likely struggle as long as world trade remains weak.

Latin America – economic growth has been slowing and continues to slow. However, in the major markets here, economic growth remains positive. Weaker currencies are likely to provide a boost to competiveness in the second half of 2014 and into next year. If this is also allied with an improving economic backdrop in the developed world, then this will help economies rebound in Latin America.

Asia – has an enviable and consistent track record of economic growth, supported by subdued inflation, current account surpluses and appropriate fiscal management. China is rebalancing, and that is to some extent a painful process, so growth may well slow here. However, both in respect of both the global economy and emerging markets, rebalancing in China towards a more domestic and consumption-led growth will be beneficial.

Emerging Europe – most countries are still showing reasonable economic growth. Turkey is likely to slow in 2014 in the face of higher interest rates. However, countries such as Poland, Hungary and the Czech Republic will benefit from their links to the improving economies of Western Europe.

Summary
Stock valuations are cheap, emerging markets are oversold and somewhat out of favour and flows have tended to leave the asset class. However, any improvement in earnings revisions could be an important trigger for better performance from emerging markets. In this year of transition, it is important to focus on companies that can deliver decent earnings growth and returns.

If you would like to discuss how this may impact on your financial planning decisions, please contact us on 01626 833225 to arrange an initial meeting.

Focus on what Counts!

Mon, 31 Mar 2014 08:42:23 +0000

With so many pressures on us and information being available on managing your finances from seemingly everyone, including the proverbial ‘man down the pub’, we took some time to identify some of the key areas that could be improved when we are planning our finances. Have a look through and see how many apply to you and then set a simple task of reducing the gap! Good luck!

Letting Short-term market movements impact upon your long-term planning – Letting short-term market movements affect your long term plan is letting your emotions rule your logic. Stick to your plan!
Letting your emotions rule your logic – Financial Planning relies heavily on using your logic. Our overreactions to situations are very rarely any help. In fact quite the opposite. They can make the problem worse than it already is. As the great American Investor Warren Buffet put it ‘If you cannot control your emotions, you cannot control your money.’
Thinking that Pensions are rubbish – Pensions are not investments. They are simply a ‘wrapper’ for money which determines the access terms to the funds and the tax treatment. Claiming that pensions are rubbish or similar, is like blaming the quality of the wine on the shape of the bottle.
Thinking that ISAs are rubbish – See ‘Thinking that Pensions are rubbish’. It’s the same thinking.
Not making a will – Failure to make a will can leave untold challenges to your intended beneficiaries. Death is not just for old people. Some simple planning and the acceptance that we are not immortal, will help us to knuckle down to planning properly in this area.
Not making a lifetime power of attorney – Ditto not making a will, only this time, you could be subject to huge legal fees and long delays if your family needed to apply to the Court of Protection for a Deputyship Order to handle your affairs, financial interests, health and wellbeing.
Underestimating the power of compound interest – Whether you are investing or paying off a loan, failure to understand the effect that compound interest has can be catastrophic for your financial health. As Einstein put it ‘Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.’
Stop making excuses for having no financial plan – There will always be a reason not to plan your finances properly. Whilst we’re not saying these things are easy, there’s a saying that sums up the fortunes of many – ‘Most people don’t plan to fail, they fail to plan’. Make a start with manageable and easy to accomplish tasks, like balancing your current account for one!
Thinking that Financial Planning is about buying the best product – If you were trying to put some shelves up on a wall, would you fuss all week over the best power drill to drill the holes for the rawlplugs, or would you get on and drill the holes. Fussing all the time about whether one product is different or better than another is not the purpose of financial planning. Yes, it’s important to ensure your arrangements are optimised, but financial planning goes further and addresses key questions such as – When will I be debt free? When can I afford to retire? What happens financially to my loved-ones if I don’t make it? Will I run out of money? What’s retirement going to look like for me? Can I attain and maintain financial independence?
Not monitoring your Expenditure – As Charles Dickens put it ‘Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.’ If you don’t know what your expenditure is and you don’t monitor it, you won’t know if you are overspending or over economising possibility until it is too late.
Investing into something but being unaware of the Risks – This includes cash and property. Many people invest money but don’t see both sides of risk & reward. These are inextricably linked. Just because you can’t see the risks, it doesn’t mean they aren’t there. Take for instance property prices in 2007 (the Housing Bubble) – Property doesn’t continue to go up forever. Many people seemed to forget this and got caught in the wave of euphoria. Property has negative periods too. Another example is putting money in cash because it’s safe. There is no such thing as a safe place to put your money. Icelandic banks offering 16%? Do you remember that one? Why were they offering such a high rate of interest? What people mean by ‘safe’ is that cash is not subject to investment returns and fluctuations – i.e. it can’t go down. However, cash is more than likely going to be subject to the impact of inflation and that is another risk – see 12.
Underestimating the Power of Inflation – Inflation is the silent money killer. Ignore it at your peril. £1 today is worth less than £1 last month. If interest rates are high, that usually means the Bank of England have raised them to curb inflation in the economy. The rate of return doesn’t matter. What does matter is the rate of real return which in simple terms is the rate of return after inflation has been deducted.
Not realising how long you could live – Due partly to advances in medicine, we are living longer and longer. Not realising this can have catastrophic effects. Dr Aubrey De Grey, a respected scientist, believes that the first person to live to 150 is already alive! What planning have you undertaken for living longer?
Thinking that you are Bullet Proof – People become ill, suffer accidents or die unexpectedly. If you don’t make sufficient provision for what might happen, your choice not to do so could have catastrophic consequences on you or those you love. Often, some simple insurance is all that it takes.
Saying you are concerned by ‘Risk’ when you really mean ‘Loss’ – Our experience is that people don’t mind risk, it’s loss they don’t like! Make sure you are prepared to accept the potential downsides of any action.
Relying totally on State Benefits – State Benefits are the bare minimum you should be relying upon. For example, whilst the state pension is a good start to a retirement income, it is not going to provide for more than the bare essentials. Ditto other state benefits, which whilst welcome, are insufficient in themselves for anyone serious about planning their finances effectively.
Not planning for Short, Medium & Long Term goals – Putting all your attention into goals over only one period, will mean you neglect the others. They all matter. Putting more money into your savings account than you need could impact upon how much you have tucked away for later on. Even a squirrel knows that winter is coming and hides their food for later on. Not planning ahead correctly can mean we don’t survive financially, or we have to make tough choices down the line.
Buying too Much House – How much house is enough? When it comes to buying a house, bigger is also not necessarily better. Unless you have a large family, choosing a 6,000-square-foot home will only mean more expensive taxes, maintenance and utilities. Do you really want to put such a significant, long-term dent in your monthly budget?
My Home is my Pension! – The average house price in the UK is approximately £250,000. Let’s assume you downsize at 65 to a house worth £150,000 and invest the £100,000. Assuming you want to maintain the value of this investment. If this paid 4% per annum to you as income (not guaranteed), this would only provide £4,000 per annum before any tax. Hardly utopia is it? People regularly underestimate how much money they will need during their lifetime. It’s too late when you are retired, because you will find it harder to replace capital when you aren’t working.
Retiring too early – People underestimate how long they will live. I met a man who had been retired for 32 years and he only worked until he was 52! People are spending longer and longer in retirement, but retiring early, even by only a few years, could have a significant impact on this period in your life.

To take a positive step in the right direction, please contact us on 01626 833225 to arrange a no obligation appointment to discuss your own circumstances.

Please note that the above article does not constitute financial advice.

Know your Limits

Tue, 21 Jan 2014 09:53:07 +0000

It was only relatively recently, in April 2006, that HM Treasury brought in legislation to simplify the many different pension regimes that existed at the time.

This was done partly to ensure that from the 6th April 2006, all pensions accrued their benefits within set limits, removing the bewildering array of different rules and caveats that existed before this date, on any new pension accrual after this date.

Pension Simplification
This was known as ‘Pension Simplification’ and with it came a limit on the maximum amount of pension benefits that one could accrue without incurring a tax charge, known as the lifetime allowance. This was originally £1.5m although this steadily rose in the years from 2006, so that in the tax year 2010/11, the lifetime allowance was £1.8m.

Stay with me here, because at the same time, the legislation made provision for people with pension pots approaching or exceeding the lifetime allowance, to protect their entitlement, provided they adhered to the conditions of their entitlement. These were called ‘Primary Protection’ and ‘Enhanced Protection’.

Much simpler already isn’t it!

Evolving Legislation
Since then HM Treasury have sought to limit further what can be paid into pensions each year, known as the annual allowance (see more below), as well as advising that from 6th April 2014, the lifetime allowance will fall from the now reduced £1.5m to £1.25m.

This may sound like a lot of money, but when you consider that in real terms the lifetime allowance has fallen and the method’s for calculating the lifetime allowance are not just a case of adding up the values of pensions, you can quickly get up to this number, particularly for people in final salary pension schemes.

For example, someone in a final salary pension scheme with an expected annual pension of £50,000, will have used £1m of the lifetime allowance. Add onto this any private pension provision and it is easy to see how the lifetime allowance could be exceeded.

A summary of the various protection provisions are shown below:

Watch that Tax Charge
Incidentally, exceeding the lifetime allowance will result in a tax charge of 55% on the excess, so this is something to be carefully monitored.

A New Hope
HM Treasury has advised that a new provision, called Fixed Protection 2014, can be applied for, before 6th April 2014.

This will effectively allow you to retain your lifetime allowance at £1.5m although you’ll need to give up any ongoing payments into money purchase pensions (typically investment linked plans) before the deadline and accrual of benefits within defined salary (final salary schemes for example) can only be made within certain rules.

For those that wish to continue to accrue benefits, Individual Protection 2014 can be used from 6th April 2014 and whilst we are awaiting the final details as to how this will work it is likely that:

It will give you a lifetime allowance equal to the value of your pension rights on 5 April 2014 – up to an overall maximum of £1.5 million.
You will not lose individual protection 2014 by making further savings in to your pension scheme
Any pension savings in excess of your protected lifetime allowance will be subject to a lifetime allowance charge

It will only be possible to apply for Individual Protection 2014 from the 6th April 2014, if the individual’s pension savings are valued in excess of £1.25m.

Annual Limits
If you’re someone who is serious about making a decent provision for retirement, it is likely that you’ll need to make substantial pension contributions and you should be mindful that the annual limit, known as the annual allowance, is also being reduced from £50,000 to £40,000.

Take Advice & Don’t Delay
Clearly this is a complex area and it is therefore appropriate to take the time to receive advice on how these provisions, both on their own or in combination, work and how they affect you.

Business owners and highly paid individuals are typically the types of people who may wish to take particular care with these rules, but clearly they can apply to anyone at any time without notice!

If you wish to discuss this further, please do contact us, as time is of the essence, if it becomes advisable to switch on protection for your pension pot prior to 6th April 2014.

Please be aware that it can take a considerable time (months) to obtain all the necessary information from pension providers in order to provide suitable advice.

One Final Thought
It is proposed that the necessary legislation will be contained in the Finance Bill 2014. The regulations covering the Individual Protection 2014 application process will therefore not be available until the bill receives Royal Assent, which is likely to be in July 2014. Whilst the legislation will have a retrospective effect from 6th April 2014, when an individual in theory can apply for Individual Protection 2014, there will not in fact be any legislation in place to allow them to do so!

If you would like to know more about how this affects your own personal circumstances, please do get in touch on 01626 833225.

The above comments do not constitute financial advice and you are advised to obtain appropriate professional advice before proceeding further.

Unbundled not Bundled!

Thu, 09 Jan 2014 14:18:19 +0000

You may be aware from media or other communications of a radical change in the way that investment fund managers’ report their charges for investing your money.

We felt it was important to explain what was happening in simple English, so here goes…….

What’s happened?
Traditionally, when you invested into an investment fund, you will pay an annual management charge that was reported to you as a single figure, for example 1.50% per annum. This is now referred to as a ‘bundled charge’ because not all of this charge went to the fund manager.

Some of the charge was paid to the adviser (as renewal commission), some to the fund manager and some to the company holding the investments on your behalf (Fund Platforms for example).

In addition, large fund Platforms could put pressure on fund managers to pay some of their share of the charge to the fund supermarket in return for the business placed with them. These were known as cash rebates.

The regulator, the Financial Conduct Authority (FCA), has now said that this is not acceptable and that this method of charging you in the future must change.

What’s changed?
The regulator has now introduced new guidelines and requires investment funds to be offered on an ‘unbundled basis’ which means that the amount that the fund manager, adviser and fund platform must communicate their charges separately.

For advisers, this is nothing new as many firms have communicated their charges transparently for some time and we now talk in terms of adviser charging (a fee paid from products) as opposed to renewal commission.

In future?
So in future the fund management and other charges will look clearer and an example is shown in the diagram below:

What does this mean for you?
Very little, although it does allow you to explicitly identify what the various parties are being paid.

In time, this may put pressure on fund managers to reduce their charges.

However, we would point out that you won’t typically be paying any more for fund management than you were under the old ‘bundled charging’ system.

If you would like to know more, please contact us with no obligation on 01626 833225.

The above comments do not constitute financial advice and you are advised to obtain appropriate professional advice before proceeding further.

What Goes Around Comes Around

Wed, 16 Oct 2013 09:03:54 +0000

What are economic cycles and how do they affect me?

One of the frequent themes that impacts upon the tactics and longer term strategy when investing, is identifying where we are in the economic cycle. Despite the turmoil and in some instances, capitulation over recent years, the economic cycles are a known and lucid part of financial understanding that, if properly understood, can ensure that our sails are set effectively to benefit from whatever stage of the economic cycle we find ourselves in.

When I refer to investing, I am not talking about speculation. The two are not the same. Speculation is not the business that we operate in at Loughtons.

The economic cycle can be broadly split into 4 main themes:

Slowdown

Recession

Recovery

Expansion

Determining where we are in the economic cycle can determine whether we should hold more in one asset class (cash, commercial property, fixed interest securities or bonds, equities or shares) or another and within each part of the economic cycle, different types of the same asset class could perform better depending upon these and other factors (equity income or growth shares).

My experience is that investors are sometimes ruled by their emotions and cannot see that investing is cyclical much like the seasons. I often liken a recession to a detox of the economy. Washing out all of the excesses that have resulted in a slowdown in the first place. However, it is this very process that will determine the foundations for the next positive cycle within the economy.

Some of these emotions may be expressed as follows:

So why don’t I just invest during the positive elements of the economic cycle?

Markets are incredibly fast and my experience leads me to believe that you cannot predict when we have moved to the next part of the cycle until we are well into it, so it is my view that you cannot predict this. However, what we can normally predict is the next phase of the economic cycle.

To properly understand economic cycles and how these impact upon investment returns, we need to understand the underlying drivers of economic growth or decline and spot these early enough. If they persist, then we will later see the results of that persistence in the real economy – e.g. our streets, villages, towns and cities.

But it can take 12 to 18 months for an underlying economic theme to begin to appear in our high streets. In the meantime, stock markets have already priced this information in months earlier, so buying in at this point, where prices have already risen, many not actually be as beneficial had the investor bought into the market 12 to 18 months earlier, when prices on entry to a market were much lower.

Therefore, understanding how economic cycles affect our tactics and strategy is where Loughtons add value. We have a developed understanding of these matters and can identify key factors that should be taken into consideration when investing funds or reviewing existing investments.

For advice on how economic cycles may affect your own financial planning decisions please contact us on 01626 833225.

Please note that the above article does not constitute financial advice.

September 1995………..

Mon, 30 Sep 2013 15:45:35 +0000

September 1995……….. eBay was founded, a new optical disc computer storage format was released, later to be called a DVD, NATO airstrikes continued against Bosnian Serb forces after repeated attempts at a solution to the Bosnian war failed, Oasis released their second album (What’s the story) Morning Glory?, and in the financial centre of the world probably (!), Bovey Tracey for those of you not aware of its status, Loughtons IFA was set up……….

So to celebrate this significant landmark we are holding a quiz. There is no entry requirement for the quiz except that to be placed in the draw to win one of three special Christmas cheese box hampers supplied by Bovey Tracey’s own Cheese Shed www.thecheeseshed.com you will need to answer all 12 questions correctly (as defined by the quiz judges). The draw will take place in public at our offices on Friday 1^st November and the hampers will be sent to the lucky winners to arrive the week of 16^th December 2013.

All of the questions have one word missing, and all we need to know is the missing word and who wrote, sung or said the following? Answers please by email (or post) to arrive no later than 9am on Friday 25^th October (email to advice4u@www.loughtons.co.uk or letter to our Office) together with your full name and home address.

	Question	Missing Word/s	Who
1	‘A ______that’s told with bad intent beats …………….’
2	‘If I had my way, I would write the word “_____” upon the door of every cottage and upon the blotting book of every public man ………….’
3	‘_____ is not a matter of life and death ……..’
4	‘When the _____ is shattered the …………………..’
5	‘a _____ rain falls softly on my weary eyes……………’
6	‘They say I _____ a man called Gray and took his wife to Italy …………….’
7	‘It is _____ and eggs. No eggs – no _____! …………’
8	‘Tin _____ and Nixon coming …………’
9	‘This morning at _____ I took her rather nifty ………….’
10	‘A _____ redbreast in a cage puts …………..’
11.	‘I would like to thank you from the heart of my _____ …….’
12.	‘no more _____ it’s only ground chalk ………’

Prize Draw Rules

Entry to the competition is restricted to one entry per person, and multiple entries will be disqualified.
Not open to employees or immediate relatives of employees of Loughtons IFA.
Automated entries, bulk entries or third party entries will be disqualified.
The Competition is open to UK residents only.
Prizes can only be sent to a valid UK address.
Winners will drawn from all correct entries received.
Winners will be contacted via email, and the winners names displayed on our website.
The Judges’ (Peter Blackburn & Richard Loughton) decision is final and no correspondence will be entered into.
The competition will run from 30^th September 2013 until 9am on 25^th October 2013.
Loughtons is compliant with the data protection act. Our policy is that we will not pass on your details to any third party without your prior consent.

Take a Break

Mon, 08 Apr 2013 09:02:58 +0000

As a new tax year rolls around, you should note that there are quite a few changes to the allowances you can claim to help improve the tax efficiency of your financial affairs.

Of course, to our clients we are on hand to advise about these and ensure that in combination they work to the maximum effect within your own financial plan.

If you’re under 65 your personal allowance, which is the amount you can earn each year before you have to pay tax, rises from £8,105 to £9,440. That means if you’re a basic rate taxpayer, you’ll save £267 in tax or £5 a week.

Note – The personal allowance is eroded if you earn more than £100,000 a year. For every £2 of your ‘adjusted net income’, your personal allowance reduces by £1.

If you’re aged 65-74 your ‘age related’ allowance is frozen at £10,500.

Note – You qualify for this if you’re born after April 6th 1948. If you reach 65 after this date, you won’t get the age related allowance as it has been abolished (this was announced in the 2012 Budget).

If you are aged 75 or over your ‘age related’ allowance is frozen at £10,660.

The Married couple’s allowance only applies to couples aged 75 or over (as it’s been abolished for younger couples). The allowance will rise to £7,915.

Tax Thresholds
The 10% tax threshold will rise to £2,790. This is the rate that you pay if your income above the personal allowance is from interest on savings. If you have earnings as well, you have to pay 20% tax on this income.

The 40% tax threshold falls from £34,370 to £32,010. This means 40% tax payers start paying this rate of tax at £41,450 (£32,010 plus £9,440) instead of £42,475 (£34,370 plus £8,105).

The 45% tax threshold which was formerly the 50% tax rate, remains £150,000.

Tax Free Allowances
This is the amount you can save or invest in an ISA every year, how much you can save in your pension and how much profit you can make from investments without paying tax.

ISAs Allowances
This is the amount you can save or invest in an ISA every year, how much you can save in your pension and how much profit you can make from investments without paying tax.

Cash ISAs – You can save up to £5,760 in a cash ISA this year (up from £5,640).

Stocks and shares ISAs – You can invest up to £11,520 in a stocks and shares ISA this year, minus anything you save in a cash ISA (up from £11,280).

Junior ISA and Child Trust Fund (CTF) – You can save or invest up to £3,720 in a junior ISA or child trust fund (up from £3,600).

The Government says it will consult on the options for transferring savings held in both cash and stocks and shares CTFs into the equivalent Junior ISAs, as it wants to support parents by ensuring that there continues to be a clear and simple way to save for all children.

The 12-week consultation, which begins at Easter, will be welcomed by parents who have long called for the Government to allow the two products to be merged due to concerns that CTF providers have no incentive to offer good deals or a decent fund range.

Pensions
The amount you can pay into your pension each year and get tax relief is £50,000 (unchanged from previous years) although this allowance is due to fall to £40,000 in the 2014 2015 tax year.

Note – If you have no earnings at all, you can still pay up to £2,880 into a pension every year and get tax relief at the basic rate of tax (effectively a government contribution, which takes your contribution up to £3,600). This is also unchanged from previous years. You can also put this amount into a pension for someone else – such as your spouse, civil partner, child or grandchild.

The Lifetime Allowance is the amount you can save into your pension over your lifetime and is £1.5 million. This is unchanged from last year, but the figure is due to fall to £1.25 million for the 2014 2015 tax year.

Other Tax Allowances
The Capital gains tax allowance is the amount of gain you can make from the sale investments and other assets without paying capital gains tax. This allowance rises from £10,600 to £10,900 per individual.

Note – If you have investments in an ISA or registered pension scheme there is no capital gains tax to pay when you surrender them or begin to draw them (pensions).

The Inheritance Tax (IHT) threshold is frozen at £325,000. This is the amount a single person can pass on when they die without triggering an inheritance tax liability. If you’re married or in a civil partnership, you can effectively double the amount you leave.

Note – The chancellor has said this rate will be frozen this year and next, in part to pay for its planned cap on care fees.

For advice on how the above affects your own circumstances please contact us on 01626 833225.

Please note that the above article does not constitute financial advice.

Auto-Enrolment

Thu, 04 Oct 2012 15:55:06 +0000

Following the recent announcements in the media, the news that employers will have to pay into a pension scheme for their employees may come as a bit of a shock.

The Government has introduced auto-enrolment and the National Employment Savings Trust or NEST for short.

Preparedness and planning is the key to ensuring that this does not cause disruption for employers.

The first thing employers should do is establish their staging date, i.e. the date that they actually have to start auto-enrolment. To do this go to this link and follow the on-screen instructions.

The process of auto-enrolment will be phased in over the next 6 years, starting with employers who employ 120,000 or more staff from October 2012.

Staff that will need to be automatically enrolled will be:

Aged between 22 and state pension age.
Work in the UK.
Someone for whom an employer deducts income tax and National Insurance contributions from their wages.
Someone who is likely to have gross earnings over £8,105 (This figure will be reviewed annually by the Government) in a year.

Staff that employers need to offer enrolment to but are not automatically enrolled will be:

Earning between £5,564 and £8,105 per annum.

Even where staff work for an employer for a very short period of time (i.e. for 1 day), if they fall into the above categories, a contribution towards their pension will need to be made (earning over £22.21 gross per day).

Employers can use the NEST scheme or obtain their own pension scheme as an alternative that qualifies under the new rules.

From 1 October 2018 onwards the minimum contribution to a scheme is 8% of qualifying earnings, of which the employer has to contribute 3%.

If you are an employer and you would like to understand more about your obligations or are seeking advice please contact us on 01626 833225.

Please note that the above article does not constitute financial advice.

Loughtons & Lameys Charity Golf Day

Thu, 16 Aug 2012 20:39:29 +0000

Loughtons Independent Financial Advisers and Lameys Accountants and Business Recovery held their 8th Annual golf day in aid of Cancer Research and the Rowcroft Hospice, at Dainton Park Golf Club on Friday the 6th July. Despite the rain, the event was a considerable success.

Players took part in both individual and team stableford competitions as well as competing for various ‘longest drives’ and ‘nearest the pin’ prizes.

The organisers were very grateful for the donation of prizes from various companies which raised over £1,000 in a very entertaining charity auction, compeered by Will Smith of Complete Estate Agents.

Richard Loughton of Loughtons Independent Financial Advisers, the joint organiser said “Both Cancer Research and the Rowcroft Hospice are charities close to our hearts and we are delighted to be able to support them. Over the last few years we have managed to raise over £30,000 for very worthwhile causes and plan to hold, what has been a very successful event, next year.” Richard also commented “We would also like to thank Dainton Park owner David Wood and all the staff at the club for helping make the day run smoothly”.

We would also like to extend our thanks to Glyn Wills Photography for providing the photos.

Photos are available for £6.00 each A4, to view the whole gallery please click here

We would also like to thank the following:

Comment – A Matter of Trust

Tue, 24 Jul 2012 11:23:44 +0000

I tuned in last night to Channel 4’s ‘Do you trust your Bank?’ In case you didn’t see it, the programme focussed on the recent activities of some of our high street banks that have recently come to light.

We were acquainted with the story of a recently retired couple who had downsized their main residence and purchased a mobile home in which to spend their retired years, depositing the released equity from the sale of their former home into their bank.

They then explained how they were approached by their bank with a view to invest the proceeds to provide an income. Unfortunately, markets turned against them and their investment fell in value. Clearly this was not what they were expecting.

Safe Investment?

At this point, I would add that there is no such thing as a safe place to put your money. All money whether held in cash or investments has some risk. Your return for the risk you take is the investment return or interest rate you receive. Cash deposits in a bank may be protected by the Financial Services Compensation Scheme on insolvency of the bank up to £85,000 per banking group, but that doesn’t mean there isn’t a risk. Inflation risk is difficult to overcome when saving in cash. As we can see, cash diminishes over time in real terms, after allowing for inflation.

Why Invest?

So the reason for investing in the first place is to try and improve on returns from cash, but of course that is not guaranteed. If we could achieve everything from a financial planning point of view from cash, then we needn’t bother to invest at all, but for most of us, we can’t because cash doesn’t earn us enough!

Conclusion

What struck me was when the retired lady mentioned that ‘we aren’t gamblers’. This concerns me because investing is not gambling, yet in the eyes of this lady, that’s exactly what she thought investing was.

Clearly from these short scenes it was obvious to me that:

The couple did not understand what investment was and what it wasn’t. It was clear that they were not at the point in their understanding with money that they knew what they were getting into.
The bank had simply sold them a product which on the face of it appeared unsuitable.

Of course, the programme focussed on the bank’s actions and how this had eroded the trust of the people concerned.

Who do Banks make profits for?

Banks are run for the benefit of their shareholders first and their customers second, not the other way around. Banks are under pressure to deliver profits to shareholders. Among other things, their retail branches (your friendly high street bank) is set stiff targets which are set by senior management for their ‘advisers’ to achieve. So guess what? If you were an adviser and your livelihood was dependent on selling so much per day, what would you do?

This is something that I come across time and time again in my dealings with clients. Thankfully, in this instance, a local Independent Financial Adviser (IFA) helped the couple recover their lost money.

Financial Advice – It’s Your Choice

This got me thinking why oh why do people go to banks for financial advice, when surely they know they are being sold to?

Unfortunately, this isn’t necessarily good news for me as an IFA because people could be tempted to tar all in financial services with the same brush.

I’m going to disagree with you if you are thinking we operate anything like a bank salesforce!

The Future

The banks have identified that they can’t make enough money out of advising you so some have withdrawn their bank sales forces including HSBC, RBS and Barclays.

Their reason is in light of the FSA’s Retail Distribution Review which comes into effect next January.

The main aim is to:

Raise professional standards.
Increase the qualification level for those giving advice.
Remove commission on investment advice.
Ensure that independent financial advisers operate to a new higher level of independence.
Ensure that clients and consumers agree the cost of advice before proceeding.

This latter point is vitally important because without consumers seeing value in what advisers do, they are unlikely to want to pay for their services. The irony is that for many years consumers have been paying for advice via commission but many think that they have been advised for free.

Our Approach

We offer a professional and personable approach:

We’re interested in you and your objectives – how will you deal with the many priorities placed upon you?
Our core priority is to help you set your sails and establish a clear financial plan.
Products are the last consideration but are the tools to get the job done, not the reason for our existence in the first place.

Sure, we charge for our services, because without that we wouldn’t exist for your benefit, but these costs are agreed at outset.

So please don’t be tempted to judge us by the actions of the banks.

For a fresh approach to financial planning that centres around you, please contact us on 01626 833225 to make a no obligation appointment.

Please note that the above commentary does not constitute financial advice. Loughtons is not responsible for the content of external websites.

Charity Golf Day 2012

Mon, 02 Jul 2012 13:30:35 +0000

Once again Loughtons Independent Financial Advisers and Lameys Accountancy and Business Recovery are delighted to announce that they will be holding their 8^th annual Charity Golf day on Friday 6^th July 2012 at Dainton Park Golf Club, commencing at 1pm with a shotgun start.

Over the previous 7 years we are pleased to report that we have raised over £26,000 in aid of various charities including Cancer Research who have been the biggest beneficiary and are once again one of our chosen charities along with the Rowcroft Hospice.

The golf will be will followed by a buffet and charity auction in the evening.

If you are interested in entering a team or supporting the day in any other way then please contact Richard Loughton on 01626 833225 or email him at Richard@www.loughtons.co.uk and he can provide you with further information.

Are you Chrometophobic?

Fri, 25 May 2012 09:32:22 +0000

Summer has arrived, I think. There’s plenty to be concerned about. Will Greece stay or go? What is the future of the Euro? Who will win the singles at Wimbledon?

Or what is chrometophobia?

Well despite most of us worrying about not having enough money, there also being a few of us who have a lot of money and worry about what to do with it.

There is also a third category, and that is those who have a fear of money. This is where an individual will have an abnormal and persistent fear of money. Individuals will experience undue anxiety and worry even though they realize that their fear is both illogical and irrational. There is the constant worry that they might mismanage money.

So for those with little money they will tend to feel very anxious about how little monies they have. For those having money, which most of us would prefer to be in the position of, there is the daily strain of managing larger sums of money and ensuring it is being correctly used.

So, constant thought and worry regarding how it affects your life can be the first indication that this is a potential phobia or obsession. This can eventually lead to depression or even worse suicidal thoughts.

For the technical ones among you, please read on: The fear of money is termed chrometophobia or chrematophobia, from the Greek word “chrimata” (money) and “phobos” (fear). The “chrome” in “chrometophobia” may be related to the Greek word “chroma” (colour) because of the brilliant colors of ancient coins – for example, gold, silver, bronze and copper.

Understandably at this time, there is much fear in the financial markets over what will happen within the Eurozone. One thing is for sure, not much has happened to allay those fears and the politicians are running out of time.

But we must be clear here. The Financial Markets are not your Financial Plan. This is to say that we must plan ahead regardless of whatever obstacles we may encounter on the way.

No doubt Frau Merkel and her cohorts will be doing their level best to resolve the Greek and wider Eurozone crisis. But we must look at what we can control, not that which we can’t.

So if you are suffering from Chrometophobia, come and talk to us. We can help you to make sense of your current financial circumstances and ensure a robust plan of action is in place, whatever the financial weather.

Please contact us with no obligation on 01626 833225.

The above comments do not constitute financial advice and you are advised to obtain appropriate professional advice before proceeding further.

Recession? What Recession?

Wed, 25 Apr 2012 16:39:36 +0000

Today’s news that the UK has crept back into recession should be no surprise to anyone who has kept reasonably well informed about developing events connected to the global economic crisis.

A technical recession is triggered after two quarters of negative GDP (Gross Domestic Product) within our economy.

Stock Markets haven’t fallen today. Why not?
The economy is one thing but the stock market is another altogether. As I write this, the FTSE-100 Index is up by nearly 17 points to 5726.26 and the Dow Jones is up by over 90 points to 13092.60.

So why aren’t stock markets’ reacting negatively to today’s news? The answer is that stock markets’ look forward, while economic data looks backward. Markets aren’t a vote on the economy today, but where investors expect it to be in the next 12 to 18 months.

However, markets are not an infallible guide to the future. A weak economy isn’t necessarily bad news for shares, but a strong economy isn’t always good news. If the economy grows too rapidly, central bankers may be forced to raise interest rates to head off the threat of inflation. The higher cost of borrowing hits corporate profitability and consumer spending, and ultimately hurts the stock market.

So what does this mean for Investors?
The normal assumptions about investing in share (equity) and bond (fixed interest security) markets have been turned upside down by the developing debt crisis in Europe. As a result, making investment decisions is more difficult than ever.

It’s tempting to wait until times are more certain. But when have we ever lived in certain times?

On the one side, there is the gloomy outlook for the world economy and on the other you could argue that some asset classes look attractively valued. Markets have swung like a pendulum as investors respond to these opposing pressures. Inaction within developed economies has maintained choppy seas for investors and the volatility within markets has continued.

So it’s Europe’s Fault?
As European politicians have effectively increased their countries’ overdraft facilities, the crisis rumbles on and predicting the final outcome is likely to be very difficult. The pain is not yet over.

European politicians have treated this as a crisis of liquidity – a temporary shortage of cash – rather than one of solvency, where countries’ finances are unsustainable.

As a consequence, the woes of the single currency zone could take a heavy toll on world growth. If there is a recession in Europe, the UK will not be impervious from the knock-on effects.

What’s the Risk?
The economic crisis has resulted in a re-establishment of the different scales of risk. Cash and government bonds were typically seen as low risk and shares were considered higher risk.

However, in a world in which sovereign debt and the banking system are under such strain, cash and government bonds may not offer the comfort investors usually expect. Even supposed ‘safe havens’ may not be as safe or as low risk as they appear.

Bonds issued by the UK and the US governments, for example, are currently in heavy demand as investors see them as a harbour from Europe’s woes. However, current low yields on gilts give no protection against higher inflation and they don’t provide dividends.

It could be argued that shares of healthy multinational companies with strong balance sheets, good propositions and capable management that can maintain good dividends look more attractive.

However, shares are more volatile in the short term and quality is the key here. Using Fund Managers with a proven track record, a robust process for determining the investments that they hold within their funds, that can seek out high quality dividend paying stocks with attractive valuations and healthy dividend yields are the lifeblood of the equity component of efficient portfolios. Can you identify these managers? Dividend income is often seen as the compensation that investors receive for any short-term ups and downs in price.

Time is of the Essence
This is not a short-term play. Investment over the medium to long term (5 – 10 years) backed up with regular reviews of the underlying investment funds is key in helping investors achieve their objectives.

As ever, investors need to remain patient and invest their time as well as their funds. This is an essential prerequisite for investors looking to build their wealth over the long-term.

Big crises have a habit of creating big investment opportunities therefore, over time, we can expect to see some wonderful opportunities unfolding.

The Stock Market is not Your Financial Plan
One thing is certain. There has never been a more appropriate time to take professional financial advice in helping you formulate your financial plan.

There is no time to lose and to wait for a full economic recovery could have a negative effect on your long-term goals and objectives.

If you would like to understand how economic events impact upon your own circumstances and planning, please contact us with no obligation on 01626 833225.

The above comments do not constitute financial advice and you are advised to obtain appropriate professional advice before proceeding further.

The value of your investment and the income from it can go up and down and you may get back less than you invested. Past Performance is not a guarantee of future returns.

Budget 2012 – Key Points

Thu, 05 Apr 2012 11:18:27 +0000

When George Osborne delivered his Budget to Parliament recently, he made it clear that the overall aim was to reward work and support growth. To achieve this, several measures were introduced that may affect you, which are outlined below:

PENSIONS

Pension Funding
Pension funding remained relatively untouched by this budget. The annual allowance remains £50,000 and rules around the carrying forward of contributions are untouched.

Pension tax relief on contributions still applies at up to 50%. The announcement of the cutting of the upper rate of income tax to 45% from April 2013 gives a window of opportunity for those people paying 50% tax, to obtain relief at the higher rate on contributions before April 2013.

With careful planning those who have not made any recent pension provision could make contributions of up to £200,000 before April 2013 by using carry forward, although professional advice should be sought in these circumstances.

Employers looking to fund pension shortfalls might want to do so before Corporation Tax drops any further.

State Pension Reforms
The Chancellor reaffirmed plans its plans for state pension reform, giving a strong indication of the need for people to save privately to retire earlier or enjoy higher retirement income.

Steps towards a flat-rate £140 a week state pension will be released in the spring. In the summer, proposals will be put forward for automatic reviews of state pension age to reflect increasing longevity. Ultimately, this could mean younger people waiting until they are 75 or more before they can draw their state pension

Income Drawdown Limits
Despite heavy lobbying from pension groups and the pensions industry for a review of income drawdown limits the Chancellor made no concessions on this in his statement.

INCOME TAX

Reduction in top rate of tax from 2013
The additional rate of income tax will remain at 50% for 2012/13, and be cut to 45% from 6 April 2013. At the same time, the personal allowance will be increased to £9,205.

For 2012/13, the £630 increase in the personal allowance to £8,105 is matched by a corresponding drop in the basic rate limit. Higher rate tax will be paid once income reaches £42,475.

From April 2013, the reduction in the basic rate limit to £32,245 is greater than the increase in personal allowance, and the higher rate tax will start once income reaches £41,450.

Child Benefit
As expected, changes were announced to soften the impact of the child benefit changes for higher rate tax payers. Claimants will only lose child benefit if they or their partners have income over £50,000. Those with income between £50,000 and £60,000 will see a gradual reduction in child benefit. The tax charge will equal all of the child benefit payment where they or their partner earn more than £60,000. These changes will be introduced from 7 January 2013. It will be possible to either make a pension contribution or a gift aid donation to reduce the level of income.

CAPITAL TAXES

Inheritance Tax (IHT) savings for Non-UK domiciled spouses
The amount that a UK domiciled spouse can transfer free of IHT to their spouse domiciled in another country is to be increased. It means that these married couples and civil partners will pay less IHT on their combined estate. The changes will be included in the 2013 Finance Bill after consultation in 2012.

Trust Inheritance Tax (IHT) Charges to be made easier
There will be a consultation on the IHT charges paid by flexible and discretionary trusts. The aim is to simplify the calculation of the 10 yearly anniversary and exit charges. It is hoped that these changes will help clients making gifts into trusts to understand the ongoing costs of the trust. The Government will issue a consultation document outlining their ideas and we hope this will be in 2012.

Knowledge of budget changes is no substitute for structured planning of your own affairs. Changes in legislation are interpreted and taken into consideration by your adviser at Loughtons as part of our Ongoing Review Service.

If you would like to understand how the budget changes impact upon your own circumstances, please contact us with no obligation on 01626 833225.

The above comments do not constitute financial advice and you are advised to obtain appropriate professional advice before proceeding further.

Know your Rights!

Thu, 22 Mar 2012 20:14:59 +0000

From April 2012, Contracting Out will be abolished under a defined contribution pension plan.

What is Contracting Out?
It is where you opt out of the State Second Pension (S2P) previously known as State Earnings Related Pension Scheme (SERPS) and instead divert some of your National Insurance Contributions into an ‘Appropriate Pension Plan’. These ‘rebated’ payments are known as ‘Protected Rights’ and have the potential to grow in your personal pension similar to any regular contributions you or your employer may make (Non Protected Rights). Consequently you do not build up any ‘state second pension benefits’ (an addition to your ‘Basic State Pension’).

Why is Contracting Out being abolished?
Benefits from your ‘rebated’ National Insurance contributions into a personal pension can vary depending on investment returns and annuity rates. It is therefore difficult to predict if an individual would be better off in the State Second Pension or Contracted Out. To help simplify the system and decisions about retirement savings the government is deciding to abolish Contracting Out.

How will I know if I am Contracted Out?
Any statements received from your pension provider will show any National Insurance contribution rebates you are currently receiving as a result of contracting out.

So what is happening?
From 6th April 2012 you will automatically be contracted back into the Second State Pension. The money already paid in from Contracting Out will remain in your pension plan as ‘Retirement Fund’ which is all contributions and transfers paid into your plan which consisted previously of ‘Protected Rights’ and ‘Non Protected Rights’ (yours or your employer’s contributions).

What about accrued Protected Rights?
There are currently certain restrictions on the benefits that can be provided from these rights. If you use the pension plan to provide an annuity in retirement and are married or in a civil partnership, you must also provide an annuity to your spouse / civil partner payable on your death of at least half of your pension. Also if you die before buying an annuity your spouse / civil partner is obliged to use any remaining fund to provide a pension as opposed to receiving a lump sum.

From 6th April 2012 these Protected Rights will convert to ‘Non Protected Rights’ and collectively be known as your ‘Retirement Fund’. The restrictions noted above for Protected Rights will be removed and all treated as the same.

If you are in any doubt or have any specific questions regarding the above legislation changes or indeed any aspect of your retirement planning please contact us with no obligation on 01626 833225.

The above comments do not constitute financial advice and you are advised to obtain appropriate professional advice before proceeding further.

Why has the Income from my Income Drawdown Contract Reduced?

Thu, 08 Mar 2012 15:14:25 +0000

Income Drawdown (also known as an unsecured pension) allows you to take income from your pension fund while the fund remains invested and continues to benefit from any fund growth.

There is no minimum amount of income that must be drawn, irrespective of age. This means that you may be able to leave your pension fund untouched for as long as you like, without the necessity to drawing any income.

Changes from April 2011 meant that:

• The maximum amount of income that may be drawn was reduced from 120% to 100% of the single life annuity that somebody of the same sex and age could purchase based on Government Actuary’s Department (GAD) rates.

• The period over which the maximum income will generally be reviewed was reduced from 5 years to every 3 years until age 75 and annually thereafter, based on the GAD rates for an individual of the same age at the time of each review.

• Tax-free cash lump sums may now be paid after age 75 where an individual has elected to set aside or ‘designate’ funds for income drawdown at the same time, even if they decide to take no income.

Therefore, previously as a drawdown investor you could draw approximately 20% more income than an annuity will pay. Whilst this higher income was advantageous at the outset, it was unlikely to be sustainable unless investment returns exceeded the drawdown rate.

Example: Previously the maximum drawdown for a man aged 60 with a £100,000 fund was £7,200 gross per annum. After April 2011 the maximum income reduced to £6,000 gross per annum. Today, these rates show that the maximum income limit for a man aged 60 with a £100,000 fund has now reduced to £4,900 gross per annum. Or to obtain the £6,000 gross per annum as detailed above he would now need to be aged 67.

Therefore if you were previously receiving an income through drawdown for the past 5 years and have received your review documents they are likely to show a reduction in your maximum annual income.

Why: Unfortunately, a few factors have worked against you since you started drawdown. Notwithstanding the changes detailed above that came into force in 2011, the GAD tables for calculating income drawdown rates which reflect the above changes and are based on medium-term gilt yields and reflect changes to the GAD’s assumptions on longevity. Consequently, GAD rates themselves have reduced and are continuing to reduce on an almost monthly basis at present.

As GAD rates change in line with other factors (specifically gilt yields), it could be that they will increase again in the future. If your drawdown policy is one that allows member-nominated reviews, it might be possible for you to request another review as/when the rates improve, which would increase your maximum income although probably not to the levels you have enjoyed previously.

Another option would be to take your remaining pension fund and buy an annuity. This would provide you with a guaranteed income for the rest of your life. However, annuity rates are also very low at present and the reasons you chose the drawdown route over annuity purchase previously may still stand.

All of these points and more are covered as part of our Ongoing Review Service. If you would like to know more, please contact us with no obligation on 01626 833225.

The above comments do not constitute financial advice and you are advised to obtain appropriate professional advice before proceeding further.

How’s your Ostrich?

Tue, 06 Mar 2012 11:19:14 +0000

You know the time, when you would rather be doing anything else than attending to those boring financial matters. It’s normal to have a ‘head in the sand’ over matters financial. We all experience this to a lesser or greater extent.

However, the chances are if you are reading this blog that you are already on the right road to financial independence.

As the end of the tax year approaches it’s sensible to undertake a last minute check to ensure we haven’t been influenced by our own ostrich and not taken action that would act in our best interests. The good news is that 5 April 2012 falls immediately before the Easter bank holidays, maximising the time available to cater for these planning opportunities.

Some pointers might include:

Inheritance Tax (IHT)

Roy Jenkins MP famously quipped in 1986 “Inheritance Tax is broadly speaking a voluntary levy paid by those who distrust their heirs more than they dislike the Inland Revenue”.

For those that do trust their heirs, inheritance tax planning centres on gifting or spending capital in order to reduce the value of one’s estate. There are many exemptions available such as the annual allowance, the small gifts exemption and normal expenditure out of income, which are often widely overlooked as effective ways to reduce the burden of inheritance tax for our heirs.

Other exemptions include making gifts out of capital to an individual or create a suitable trust to house the capital.

If you are a business owner, it’s prudent to review succession planning to consider whether you are likely to benefit from business and agricultural property relief on your death, or on a lifetime gift of your business. Where this is not the case, how will IHT bills be paid and could they be mitigated?

These reliefs can have a major impact on the amount of IHT payable.

For your information, the nil-rate band is frozen at £325,000 until the 2014/2015 tax year and will then increase in line with CPI inflation. Provided the full nil-rate band is available to the estate, assets in an estate up to this amount will not normally currently incur an IHT charge.

It would be prudent to check that, if property prices recover and stock markets continue to improve, it would be worth considering the impact that this could have in relation to the frozen nil-rate band, which won’t increase until after the 2015/2016 tax year.

Income Tax

As Jean Baptiste Colbert once observed “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing”.

It seems that we could end up hissing if we don’t help ourselves to the available exemptions.

The Personal Allowance and the Basic Rate of Income Tax

As everyone is entitled to a standard income tax personal allowance and a basic rate income tax band, making use of these can save a considerable amount of tax. The standard personal allowance for 2012/2013 is £8,105 (increasing from £7,475 in 2011/2012), while the basic rate band reduces to £34,370 from £35,000. A high-earning spouse or civil partner holding investments in their own name should take advice on whether it is appropriate to consider holding these in their spouse/civil partner’s name before 6 April 2012.

Pensions

Pension contributions can be a valuable and tax-efficient way to reduce the income tax liability of a higher or additional rate taxpayer. Appropriate advice should be sought before the end of the tax year, to ensure that this year’s allowance has been fully used.

The timing of pension contributions is also important.

Investments

Switching income producing investments into a non-income producing form may enable you to preserve your personal allowance and advice should be sought before the end of the tax year to establish if this could apply to you.

Individual Savings Accounts (ISAs)

An ISA does not result in any taxable income or capital gains and should, therefore, be the first step when considering investing tax efficiently. All too often it is overlooked. The current ISA limit of £10,680 (of which up to £5,340 can be invested into a Cash ISA) will increase to £11,280 and £5,640 respectively from 6 April 2012. Has your ISA allowance been fully used? What about your partners?

Up to £3,600 can also now be paid into a junior ISA (JISA) opened by a parent or guardian on behalf of a minor (or by the minor if they are aged 16 plus) who is not already eligible for a child trust fund (CTF). The CTF subscription limit has also been increased to £3,600 a year.

This is another opportunity for parents and other relatives to invest tax free for their children.

Capital Gains Tax (CGT)

Every individual, including a child, is entitled to an annual CGT exemption. This is £10,600 for tax years 2011/2012 and is frozen at this level for 2012/2013. It is worth up to £1,908 (at 18%) or £2,968 (at 28%). Has your CGT allowance been fully used? What about your partners?

….

All of these points and more are covered as part of our Ongoing Review Service. If you would like to know more, please contact us with no obligation on 01626 833225.

The above comments do not constitute financial advice and you are advised to obtain appropriate professional advice before proceeding further.

Snowdropamania

Sat, 03 Mar 2012 07:22:19 +0000

Well what can I say when I read a certain news item recently. ‘A collector paid £360 on eBay for a single type of Snowdrop bulb’ The Snowdrop collecting fashion has taken off. Pardon?!!

This sounds very familiar, was it only last autumn that I wrote the article on ‘Tulipmania’. Can it be that tulips have morphed into snowdrops?

It appears that snowdrops have a very dedicated following (so did tulips!) Record prices are now being paid for single bulbs (sounds like tulips all over again) as a growing profitable business has developed in order to meet the demand of the growing number of snowdrop collectors. Some of these collectors are becoming increasingly competitive when it comes to obtaining what type of species or variety they would like (No deaths yet! But there have been recorded incidents of thefts).

So in these last few years we have seen a mania starting to grow revolving around snowdrops. It appears that there has been a big increase in interest in all things snowdrop.

Apparently the £360 price tag was a new record price for the most expensive snowdrop bulb ever sold. Some people think they can make quick money (definitely tulipmania all over again). Yes, it may be collectors who are fuelling this frenzy, but wait until the speculators arrive.

Tulips were first imported to Holland in 1593. So what do we have in common? Tulips were not native to Holland, The snowdrop is not native to the U K.

The tulip, being a unique flower made it widely sought after in Holland. Apparently the snopdrop, also unique, is now being widely sought after in the U K.

Tulip bulbs, due to a mutation, came in a different variety of colours.

With snowdrops apparently there are 20 different species of wild snowdrop in the world with up to 2,000 cultivated varieties.

The different variations of the mutation with the tulip made them very attractive in Holland in the 17^th century. This led to dealers in the 1630’s to start dealing in these bulbs in a big way, speculation on the tulip bulbs took off. ‘Tulipmania’ had arrived in Holland.

Due to the distinctiveness of the tulip bulbs the Dutch were willing to pay more and more for these bulbs, utilising their entire savings and selling other assets such as property, animals and even dowries in order to get more tulip bulbs.

Are we about to see ‘Snowdropamania’?

Good financial planning advice has always been in fashion, so if you would prefer a prudent approach to planning a healthy financial future, please contact us on 01626 833225 to find out more.

Please note that the above article does not constitute financial advice.

Financial Planning Myths – Only wealthy people need a Financial Planner

Wed, 15 Feb 2012 10:08:40 +0000

This is a common misconception among those people who do not consider themselves wealthy.

Sadly, this assumption could lead to a lack in planning a better future for themselves under the supposition that only wealthy people need a financial planner.

Financial planning is about helping people achieve their short, medium and long-term financial goals. Many individuals incorrectly assume that they need to be wealthy to obtain professional advice.

The reality is that a simple meeting can turn your relationship with your own finances around, giving you perspective and helping you to direct your energies to achieve your aims.

Unfortunately, some people don’t take advice and this inaction could have a significant detrimental impact on their financial future.

The important thing is that you take the first step towards helping yourself.

As modern financial planners we operate with a different approach and focus our attention on what is important to you about your money.

We will help you to explore your goals in life and formulate a financial plan, so that your finances fully support those goals.

Subject to your agreement we will then meet with you on a regular basis in the future to review your plan and ensure that you are on track, with strategic and tactical advice to help you adjust your plan where this is necessary. This process need not take a long time, once the financial plan is in place, but is essential in taking account of a change in your plans, circumstances or views and changes in legislation and the economic climate.

Planning in this way isn’t the preserve of the very wealthy and is relevant to everybody.

For impartial advice on your own personal circumstances please contact us on 01626 833225 to make an appointment.

Please note that the above article does not constitute financial advice.

Financial Planning Myths – Pensions are Rubbish

Mon, 23 Jan 2012 10:44:25 +0000

When speaking with new clients for the first time, I sometimes hear them say something like ‘Pensions are rubbish’ or similar. This can be an indication as to what level of knowledge that particular client may have with regards to ‘What a pension is’. It can also be an indication of their attitude towards pensions.

Typically they are referring to their money purchase pensions, where contributions are invested into one or more investment funds. These funds will fall and rise in line with investment market conditions and the returns paid from the underlying holdings held within investment funds.

Their response can often be for one or more reasons:

They have invested and not seen a return or even lost money, typically looking at their plan’s performance over the short term.
They have invested a small amount of money and then realise that they are not going to have the income they were expecting at retirement.
They are unrealistic about the level of investment returns that their pension fund has the potential to provide.
They have invested without diversity, often relying on one fund manager or sector (e.g. property) to deliver returns. No one sector or fund manager is always going to be the best performing all of the time.
They have invested over a short period of time.
They have not been able to access their pension fund in its entirety.
They have seen one of their other investments (e.g. an ISA) perform better than their pension fund.
They know of someone who has had one or more of the above happen to them.

So what are pensions?

Well, they are nothing more than a tax efficient ‘container’ for your investment funds. Poor investment performance has nothing to do with the pension ‘container’ and everything to do with the investment funds that your contributions are invested into.

You wouldn’t complain that a glass of wine tasted badly because of the shape of the bottle that the wine came in would you?

So, often when working with clients, we turn our attention to the following things:

What investment funds is their money invested into?
How well are the investment funds run? Who manages them?
How well diversified are their investments?
How does the combination of investment funds meet their attitude to investment returns / risk and their expectation of future returns?
What are the costs for the pension ‘container’?
What are the costs for the individual funds run by the fund managers?
What access will they need from their fund and when?

Typically with today’s open investment architecture you could hold the same investment fund within many different ‘containers’, such as an ISA, a pension, an investment or insurance bond or collective investments such as unit trusts.

Of course, pensions have a big advantage over many other types of ‘container’ in that contributions can benefit from tax relief of up to 50%, meaning that extra contributions are paid by the Government on top of any other contributions that are made. There are limits to the level of tax relief, however, this acts as an incentive to save and can give a significant boost to the investment fund.

What else do I need to know?

Over the long-term (10 or more years) a key element is the quality of the fund management.

Poor fund management will in time deliver poor results. Good fund management has the potential to deliver good results.

Using our robust investment process, we can identify those fund managers that deliver good quality fund management within their fund. This will take account of their track record but also how returns are sought by the fund manager i.e. the process involved.

We identify Fund Managers that:

Stick to what they say they are going to do – i.e. the remit of their fund.
Within equity based funds, they identify companies that have strong balance sheets with well-contained liabilities, good managers and a proposition that works with a clear desire for the company’s services.

The importance of reviewing your portfolio

You wouldn’t go to the Gym once to remain fit for life would you? Everyone who is interested in maintaining a healthy lifestyle knows that they must make a regular effort to do so. So, if you want to maintain a healthy investment portfolio, you need to regularly review it to ensure that it is on course help you meet your goals and objectives.

A regular review of your portfolio with Loughtons can take into account many factors and ensure that your portfolio is optimised. Fund managers may leave, the market, economic and political environment will certainly change and your original objectives may alter. Different asset classes (cash, property, equities and fixed interest securities) will rise and fall within your portfolio at different rates, requiring them to be re-balanced to your attitude to investment returns / risk.

So the next time you hear someone bemoaning their pension scheme it could just be that they don’t understand what they really have and you may suggest they take a closer look at the fund managers they are using, in conjunction with an Independent Financial Adviser.

For impartial advice on your own personal circumstances please contact us on 01626 833225 to make an appointment.

Please note that the above article does not constitute financial advice.

15th February 1971

Fri, 16 Dec 2011 08:46:22 +0000

Being of a certain age, your writer notes that the 40^th anniversary of decimalisation in the UK has passed by without a murmur, no great fanfare, no memorials, just a forgotten memory – for some of us.

In recent years I have developed what my wife calls a very disturbing habit. Every time I make the regular shop with her I have this habit of looking at prices and converting them back to the old £sd. How much is that loaf of bread?? I recall being able to buy a loaf of bread for 1/11, the chocolate bar was 5d and as for petrol, at 5/- a gallon I could buy 4 gallons for the pound. The surprising and pleasant result of this habit is that I rarely get taken shopping any more.

But it does raise the issue of how much more interesting the old currency was and the various names the coins had. For example we had 960 farthings to the pound, 8 half crowns in my pocket also made a pound, not forgetting the florin, the tanner, the joey, the shilling (bob) – after all two shillings known as two bob made one florin and that took ten of those to make a pound. Lost yet? Now isn’t that much more interesting than a straight 100 pennies to the pound or dare I say it 100 cents to the Euro.

Of course these nicknames for our coins delve way back into our history. I will let you look further into this. But somehow being paid 2/6 for a Saturday mornings work sounded a lot richer that 12.5 new pence, which became new pence and then just pence.

I recall visiting the post office on the 15^th February 1971 to convert some of my hard earned pocket money for the new coins. The new half penny was certainly very small compared to the old ship half penny. It was obviously a sign of the things to come, as indeed the new coins did not quite buy as much as the old coinage and the fate of the new half penny was short lived as inflation started to take it’s toll during the seventies. As most of us were still coming to terms what this new coinage would buy for us inflation crept up on the blind side and before you knew it four gallons of petrol for a pound was history, made in a blink of an eye!

The BIG mistake today though was looking at the share price of my Lloyds Bank shares, 4/9d. Okay 24p, to you but I still cannot help thinking how much was the Lloyds Bank share price in 1971. Is it just possible the share price then was higher than this? I know Lloyds Bank have made various changes to their share structure, but the moral of the story to me is if I am looking somewhere to store my wealth, then I think a visit to an Independent Financial Adviser may be just more profitable than a visit to the Bank.

Please note that the above article does not constitute financial advice. For advice on your own personal circumstances please contact us on 01626 833225 to make an appointment.

The Good, the Bad and the Eurozone

Thu, 24 Nov 2011 17:25:44 +0000

Have our elected representatives across the developed economies dealt with the credit crisis? Recent market activity would suggest that they have not and have simply delayed the further action that will be required in order to bring some stability to financial markets.

In response to this, the impatience of stock markets has shown through recently with corrections in the major indices across the globe. This is largely due to the continued problems of high government borrowing and rising debt levels. As you will no doubt be aware, this has resulted in the likes of the USA losing their coveted AAA credit rating. This pushes up the cost of repaying the same borrowing.

This has also impacted upon the sustainability of the eurozone and raises question marks as to how long the lack of growth in developed economies will persist.

Why we need Banks!

Much to the annoyance of some, bank balance sheets across the globe are still being repaired. There are estimates that US banks are two thirds of the way through this process and UK banks are around half way through, although European banks have hardly started!

Unfortunately, if we adopt a capitalist system, we need banks, or something that performs their normal role, that is the supply and control of money within the economy. Banks have not been able to perform their normal role due to the extreme conditions of the credit crisis.

Eurozone-o-phobia

The challenge in the Eurozone is that every country that is a member of the single currency has their currency pegged at the same level – the Euro. This means that Germany, for all her strength has the same currency exchange rate as Greece.

The only way that these economies and all the economies that make up the Eurozone can be distinguished is in the interest that they pay on their debts. Concerns continue to focus on Greece, which has seen the largest widening of the cost of borrowing when compared to Germany. Unfortunately, Greece has had to borrow more money simply to pay the interest on its mounting debts.

Back in Old Blighty

Back at home, the debate about George Osborne’s plans to cut the government deficit continues. Some argue that these cuts are too quick and will push up unemployment and slow economic growth. They also argue that the recovery in the private sector will be impeded by tax increases and will not be able to counterbalance the contracting public sector.

As a contrarian view, some argue that these cuts are needed due to pressure from the bond (UK borrowing) and foreign exchange markets and that without such cuts; the UK may even face the same problems as Greece. In addition they state that public sector finances are still unstable and the cuts made so far may not eliminate the deficit and the level of outstanding debt will consequently continue to rise for several more years.

The Cuts in Context

Let’s look at the public finances in the UK. The figures go something like this:

Tax, National Insurance and other Revenue	£589,000,000,000
Government Spending	£710,000,000,000
New Debt	£121,000,000,000
National Debt	£909,200,000,000
Planned spending cuts (current year)	£22,000,000,000

If we deduct 7 noughts and use the figures to represent a modern UK household, they would look something like this:

Income	£58,900
Spending	£71,000
New Debt on Credit Card	£12,100
Amount outstanding on Credit Card already	£90,920
Planned spending cuts	£2,200

Clearly under these circumstances, debts are going to continue to rise.

Debt Exit Strategy

So how do we extract ourselves from these difficult economic conditions? Some possible
options are:

Have a credible plan for reducing the debt levels over time.
The gap between the growth of the economy and the interest payments made to service debt needs to widen.
The longer the term of the loans (debt) that the government owes, puts less pressure on government finances, because less debt needs to be refinanced each year.

So how are we doing against these possible routes in the UK? The UK government debt level is for now considered sustainable by financial markets. The government has a credible plan for debt reduction and although growth is slow the interest payments on the debt is also low.

The UK also has longer term loans than most other developed economies.

Conclusion

The road to recovery is not quick and the options mentioned above are tough and we all have experience of this across the developed economies, i.e. the UK, US and Eurozone.

Many investors have looked for a risk-free investment, however, this may prove elusive as Government bonds (debt), usually considered to be risk free, and are unlikely to provide a return that exceeds inflation, over a reasonable time horizon.

After a sharp increase, Gold has recently fallen in value, however, in these circumstances there are selected opportunities in the bond markets and in global equities providing dividends. However, investors will need to accept capital and income volatility and these markets have the potential to provide a source of real returns.

Please note that the above commentary does not constitute financial advice. For advice on your own personal circumstances please contact us on 01626 833225 to make an appointment.

What did the Normans ever do for us – Derivatives?

Thu, 27 Oct 2011 18:42:38 +0000

To start with, a very nice 21^st century definition:

A derivative is a contract between two parties that specifies conditions—in particular, dates and the resulting values of the underlying variables—under which payments are to be made between the parties.

We have all become a lot more aware of these derivatives in the last few years culminating in the Banking Crisis of 2008.

So what has this to do with sheep farmers in the Norman period of our history who were producing wool. Well during the 12^th and 13^th centuries in Britain the vast majority of the population were poor. Success was deemed as surviving the winter to see another summer. Most trading, whether vegetables, wheat or any other produce was about the day-to-day need to feed yourself and the family. The same was true with wool merchants, who sold their wool in the Market Square for what anyone would pay for it.

The landowners or the Monasteries had a great need for monies up front, while those newly developing traders looking to sell the wool overseas were looking to acquire as much good quality wool as possible.

So, slowly but surely the trade developed where the producers of the wool started to sell their wool in advance, i.e. they would contract to sell their wool in advance to the middle men who would then export overseas.

It was not long before the producer’s of the wool, which in many cases were the Monasteries, began to sell next year’s wool. This eventually led to wool being sold up to several years in advance. Therefore within a short period of time, a large percentage of the wool was disposed of by advance contracts, this being the practice of many of the monasteries, who would sell their wool from a couple of years or sometimes as much as fifteen and twenty years ahead. Eventually, although small in number to begin with, there were merchants, both in Britain and abroad who were becoming rich in liquid capital.

By selling the wool in advance of production, this use of ‘derivatives’ allowed the risk related to the price of the underlying asset, the wool, to be transferred from one party to another.

For example, the wool producer and the trader could sign a futures contract to exchange a specified amount of cash for a specified amount of wool in the future. Both parties therefore reduced a future risk: for the wool producer, the uncertainty of the price, and for the trader, the availability of the wool.

However, there was still the risk that no wool would be available because of events unspecified by the contract, such as the weather, which was a very big problem in this country or that one party would renege on the contract.

You cannot but help think sometimes that there is nothing new under the sun!

If you would like to understand the history of your own pensions or investments or wish to make a positive difference to your own finances, please feel to call us on 01626 833225 to find out more.

Greece on the slippery road

Wed, 21 Sep 2011 16:31:55 +0000

We are now 3 years into the economic recovery and unfortunately employment growth remains subdued.

As Governments, companies and consumers continue to repay their borrowing (deleverage) in addition to spending cuts like those seen in the UK with slow consumer spending this has led to a restriction of economic and employment growth and the low interest rate environment is likely to continue for the foreseeable future.

Therefore cash deposits will most likely continue to pay a negative real return, when we factor in the ongoing rate of inflation which is approximately 5% in the UK.

The government (sovereign /central bank) debt crisis in Europe remains the biggest threat to global recovery. Whilst the austerity measures are prevailing, economic growth is not evident at this stage.

Why is economic growth so important? Well, if economic growth is healthy, it means that more people are employed which in turn can stimulate among other things, the property market whilst the flow of money is greater within the economy and governments can raise more taxes to repay debts and raise interest rates to control inflation and public spending.

Unfortunately, for Greece, their method of tax collection is not as efficient as our own HMRC and the alleged corrupt collection of their own tax revenues, means effectively that the country has no sustained income from taxation and mounting debts. It may be a matter of when Greece defaults rather than if, and their departure from the Euro appears inevitable.

So, how can the Euro debt crisis be resolved? Well one solution could be for the European Central Bank to issue a ‘Euro bond’ which could help recapitalise the failing economies within the Eurozone – for example in Portugal, Italy, Ireland and Spain. However, in the short-term and for the remainder of 2011, expect choppy waters and volatility in stock markets until this situation improves.

So, how should investors respond? As we have said before, in the main our clients are not investing over the short-term so the sentiment of the day is not a concern to them. On the contrary, they are playing the long game, remaining patient and in conjunction with our help, ensuring that they are not falling foul of some of the common investment mistakes.

If you would like to discuss your own circumstances or wish to make a positive difference to your own finances, please feel to call us on 01626 833225 to find out more.

Working Together – Accountants and Financial Planners

Mon, 12 Sep 2011 10:04:32 +0000

In this blog post, we explore how Accountants and Financial Planners, whilst not undertaking the same roles, can help you achieve your financial objectives and goals.

If you were asked which one word relates to Accountancy, I should think that ‘Tax’ would be high up on your list.

What your Accountant Can Do For You

Suitably qualified accountants are skilled in understanding the ever changing tax position of individuals, companies and charities. They may have to interpret legislation to ensure that they are up to speed with the latest developments in taxation to ensure that their clients are paying the correct amount of tax and not falling foul of the rules.

Some Accountants are proactive in ensuring that their clients have prepared for any forthcoming changes to law or ensured that sufficient funds are put by to pay tax. They will also be useful in helping you decide on the structure of any new business venture, be that as an incorporated company, limited liability partnership, partnership or sole trader.

What your Accountant can do is to look at the bigger picture and spot any opportunities to help you stay ahead. Are you depreciating all the right assets in the most productive way? Is your business structure the most beneficial for you now and in the long term? How do recent changes to tax law affect you? What opportunities exist?

And of course, Accountants can ensure that your tax returns are submitted on time and that you pay the right amount of tax, acting as a liaison between you and HMRC.

Accountants generally charge an hourly fee for their advice, and thus are quite task-oriented. You will usually need to be specific about how you want your accountant to help you, but their breadth of knowledge can be deep.

What Your Financial Planner Can Do For You

Likewise, If you were asked which one word or phrase relates to Financial Planning, you may come up with many examples – investment, protection, retirement, estate planning, mortgages.

Generally, people tend to associate financial planners with products, rather than a strategy. A modern financial planner, does just that, helps you create a financial plan.

As the saying goes, most people don’t plan to fail, they fail to plan.

The aim is simple – to help you build wealth and repay debt and whilst that process is being undertaken, to ensure that you are protected in the way that you require.

We have advised many people, not just about the products they should use, but about their strategy. The products are the tools to get the job done, not the actual job that needs doing!

Modern Financial planners are also focused on the big picture relating to goals and aspirations. Some people may have the experience of a Financial Adviser just looking to sell them products. This is not taking into account the bigger picture.

For business owners, it is also important to see how your business fits within your life objectives.

These decisions can also be extremely emotional to deal with and a Financial Planner can help to provide a dispassionate objectivity and perspective.

The cost of any work to be undertaken is agreed in advance. Therefore you know what you are paying for the financial advice.

Modern Developments

Accountants and Financial Planners are working closer to help achieve the best of outcomes for their clients, so you may find that this two-pronged approach gives you a thorough perspective on your affairs.

Get in Touch

If you‘d like to know more about how we can add value to you, please feel to call us on 01626 833225 to find out more or to arrange an initial complimentary meeting.

The South Sea Bubble

Thu, 01 Sep 2011 14:03:25 +0000

‘What goes up must come down’. We all remember from our school days Sir Isaac Newton for his famous law of gravity and the picture of the apple falling on his head.

Sir Isaac Newton was a genius mathematician who had an input into many aspects of life in this country at the end of the 17^th and beginning of the 18^th century.

So what prompted him to state “I can calculate the motions of heavenly bodies, but not the madness of people”?

During Sir Isaac Newton’s lifetime a financial event took place that was famously known as the South Sea Bubble. Earlier in 1711 The South Sea Company was formed. By 1720 this had developed into the South Sea Bubble, the market was flooded with a whole variety of brand new ventures, some of which were so secret that they could not inform the investors what they were investing in. This only aided the speculative frenzy to increase even further. Speculation became rampant as the share price kept skyrocketing. It was thought that this company “could never fail”.

Few could avoid the promises of quick easy riches.

Well Sir Isaac Newton was not immune to what was happening around him. He invested early in the South Sea Bubble and had the good fortune of making a large profit by selling early, which despite being relatively wealthy already was important to him. He had invested early and then got out relatively early.

However he then watched friends and colleagues around him continuing to invest and becoming ever richer as the investments continued to rise in value.

Sir Isaac Newton then made his biggest error of judgment. He could not stay out of the market, so back in he went. However to make up for lost time he invested substantially more of his monies, some of which he had also borrowed.

This time he invested just as the bubble burst. Investor confidence soon began to wane, the sell-off quickly followed in July of 1720 which then became a collapse and by September the share price had completely plummeted, devastating institutions and individuals alike, including Sir Isaac Newton who financially lost a large amount of his wealth.

Therefore we discover that even a genius mathematician like Sir Isaac Newton could not predict the stock market, nor could he avoid being succumbed by greed. As Sir Isaac Newton learned, we are affected by the basic elements of human psychology – fear and greed, especially when it relates to our finances.

If you would like to benefit from our professional help in effectively managing your investments and strategy in the current climate, please do get in touch on 01626 833225

The Rollercoaster of Investor Emotions

Wed, 24 Aug 2011 13:38:30 +0000

If stock-market investment could ever truly be likened to a rollercoaster ride it would be now as we have recently experienced sharp falls and rises in global stock-markets largely due to investor sentiment as the potential impact of the deepening sovereign debt crisis and worsening economic data is revealed.

It is worth reminding ourselves that many of the companies that we invest into remain in excellent health. Debt levels are generally low, unlike during the financial crisis of 2008, and many companies are still producing decent profits. In the US, for example, the vast majority of the US companies in the S&P 500 index have now reported earnings for the second quarter of 2011 and 72% of those have exceeded analyst expectations. They are understandably cautious on the outlook but this does highlight that there are companies out there that are still doing well.

Furthermore, with western economic growth under pressure, Asia had been the popular area for investment until recently. Investment in these areas has slowed down recently amid concerns over countries such as China not being able to successfully control their faster growth rates. However, over the long term Asia and the Far East can still be seen as an area with much potential for future growth.

Gold has been favoured by investors in recent months, as its price has increased as investors have sought perceived safe havens. However, with the current price of approx $1,700 having nearly doubled in the past 3 years there is a concern that this price may be somewhat high and therefore investors should be cautious of putting new money into this area in the short term.

Notwithstanding the above daily fluctuations of markets; which can indeed test the nerves, we at Loughtons are very keen to ensure we carefully consider client investment objectives. In particular the reasons why they invested, the potential timescales of the investments and the appetite to risk and reward that they are prepared to take, to ensure that the investments currently held are appropriately aligned to their goals and objectives now and in the future.

As you know we always look to stress the importance of diversification of your investments and this will be beneficial to you as the overall impact of market changes takes hold. You are reminded that investments are medium to longer term by nature and indeed investment of time as well as capital is a requirement for any sensible investor.

If you need more help managing your investments and strategy in the current climate, please get in touch on 01626 833225

It is not time to panic

Fri, 05 Aug 2011 08:07:10 +0000

Why are global stock markets falling?

There is a general realisation that lifting the US debt ceiling or striking a deal on Greek debt will not solve the underlying problem facing the world economy. Governments, companies and individuals in developed countries are still very much ‘over borrowed’ and therefore need to continue to ‘tighten their belts’ for some time yet which has a ‘knock on’ affect that the prospect for economic growth outside of emerging markets remain somewhat limited.

These growth fears are further compounded by investor worries that Italy and Spain could be the next European economies to default illustrating further that the recent deal struck on Greek debt has quickly evaporated.

Consequently it is increasingly likely that governments will resort again to monetary easing to kick start their flagging economies. This would be despite the high levels of inflation that currently exist. Otherwise we could face a testing time in the markets in the next few months.

With stock markets falling, investors have sought ‘safe havens’ – Gold and currencies such as the Yen and the Swiss Franc. Furthermore, companies with exposure to emerging markets continue to produce good results. Careful stock picking can find good returns even when the economic outlook is gloomy, and there will continue to be good opportunities for investors. We could even see a rally in the markets now that the threat of US shutdown has been averted, as companies may become more relaxed about investing.

One of the main risks for investors is withdrawing from the markets at the wrong time. Time in the markets not timing the markets should continue to be a priority for investors. Furthermore, it is well worth remembering that our clients like many others investors have all diversified their investments amongst various asset classes broadly; Cash, Fixed Interest, Property & Equities, and whilst in the short term will see the value of their investment portfolios drop, this will not be to the same extent as the stock markets generally.

However, the good news is that investors will be rewarded for maintaining the risk within their investments. They will see value in stock prices, particularly in stocks where businesses are in a position to get through this difficult period of the economy in good shape, and where they have rising cash-flows, earnings and dividends. Therefore there remains a significant upside on a three-to-five year view. Investors who do not currently need cash may wish to look at the longer term, and take advantage of these depressed prices, as we look to higher equity values in months and years to come.

If you need more help managing your investments and strategy in the current climate, please get in touch on 01626 833225.

Calling all Professionals

Thu, 28 Jul 2011 14:43:44 +0000

Our regular blog update takes a different turn this week as we talk about the professionals that we are able to work with and can help to deliver a first class service to their clients.

With the implementation of the retail distribution review in January 2013, Independent Financial Advisers will be required to demonstrate higher professional standards and also transparency around their fees and remuneration.

In order for an adviser to be able to use the term ‘Independent’ from 2013, IFAs have to meet the whole of market requirements. This will no doubt be helpful in developing and maintaining connections with other professionals such as solicitors and accountants.

Developing new connections with professionals is often difficult and in the case of solicitors this may partly be because they are waiting for the commencement of the Legal Services Act which comes into force later this year.

This cautious and at times, suspicious attitude to financial advisers will no doubt contribute towards the above challenge.

Loughtons has moved to a transparent fee based service which we believe will form the foundation for successful liaison with other professionals that appreciate the benefits of sound financial and life planning.

We’ve also gone further by developing a compelling client proposition that delivers added value for the lifetime of our clients. Our approach to formalizing our ongoing review service is seen as a positive step to establishing and maintaining client relationships and is fundamental in working with other professionals.

We acknowledge that we are not solicitors or accountants but we recognise that we have a vital role to play in advising the clients of these professionals. Indeed our philosophy is to cultivate long term relationships with our clients and we pride ourselves on our professional approach to meeting their needs. By working with fellow professionals, we believe this will enhance the service that all clients will receive.

We welcome contact from fellow professionals who are dedicated to providing a first class service to their clients.

To get in touch, please call 01626 833225.

State Pension Deferral

Fri, 22 Jul 2011 13:31:33 +0000

When advising clients, we are often asked how state pension deferral works. Whilst the state pension is a complex area, we have provided our interpretation of the current rules surrounding this.

Under current legislation, the State Pension does not have to be taken at the State Pension age. It can be deferred indefinitely and taken in the future either in the form of either an increased income or as a lump sum. This applies to the basic state pension as well as the second state pension (S2P), state earnings related pension scheme (SERPS) and the graduated retirement benefit.

Increased Income

If the claim for State Pension is deferred for at least five weeks, the original pension due at state pension age will be increased by 1% for every five weeks that the pension is deferred (0.2% per week) – this is the equivalent to 10.4% for each full year deferred.

For example, someone reaching State Pension age with a pension entitlement of £100 a week and choosing to defer their State Pension for five years would earn an extra pension of £52 a week for the rest of their life.

However, they have done without an income of at least £26,000 (excluding any increases in the state pension during the deferment period).

Lump Sum

As an alternative to taking a higher income illustrated above, after the period of deferment, the individual also has the option of taking a lump sum. To qualify for this, the pension must be deferred for at least a year. The lump sum is based on the amount of weekly State Pension the individual would receive plus interest at 2% above the Bank of England base rate. When the State Pension is eventually claimed, it will be at the same rate as it would have been had it not been deferred.

This is often misunderstood and clients sometimes think they will be better off deferring their entitlement. However, please remember that you will have to forego receipt of the income during the deferment period.

Weighing up the Risks

If you are deferring your state pension, and choose to receive an income in the future, how long would it take for you to recoup what you have given up through deferral?

How long would you have to live before you were in profit again?

What are the risks if you don’t survive?

This is especially relevant as we are currently entitled to a state pension from age 65 (subject to sufficient national insurance contributions).

Can I stop my State Pension once it has started?

In short, yes. If an individual is receiving their State Pension, they can cancel their claim to the State Pension and have it deferred. The pension will stop until the individual chooses to claim it again. It should be noted that this can be done only once – when the pension restarts, it cannot be deferred again.

Once restarted, as before, the State Pension will be increased to take account of the period of deferment. Alternatively, if deferred for at least a year, a lump sum can be taken.

Would you like to know more?

If you ‘d like to know more about how we can help you to plan for and during retirement, please feel to call us on 01626 833225 to find out more or to arrange an initial complimentary meeting.

We can also offer telephone based support as well as more traditional face to face meetings.

Press Release – Loughtons & Lameys Golf Day in aid of Cancer Research

Sun, 17 Jul 2011 18:28:09 +0000

Lameys Accountants and Business Recovery and Loughtons Independent Financial Advisers are pleased to confirm their 7^th Annual Golf Day in aid of Cancer Research at Stover Golf Course on the 7^th July was once again an outstanding success. Whilst the exact final figure is yet to be confirmed, Adam Buck the joint event organiser from Lameys confirmed that “this has again been a very successful year particularly when you consider the current economic environment, and we have once again raised in excess of £3,500 for our nominated charity”.

Over 64 players took part in both the individual and team stapleford competitions as well as various ‘longest drives’ and ‘nearest the pin’ prizes. In addition several items were donated which raised over £1,000 in the charity auction held in the evening. Adam commented “I would like to thank the many helpers and local and national businesses who supported the day or donated prizes, as without their help the event would not be possible”. Richard Loughton, the other joint organiser agreed and confirmed “This is a charity close to our hearts and one which is struggling to raise the funds it needs to continue its vital work. This is now the 7^th year we have run the event and have now raised over £28,000, so we’re already planning for next year!”

Seen below, the winning team, from left to right; John Hellier from Loughtons with Tony Stanton, a Stover member, and John & James Wych, from Business Navigators.

Tulips from Amsterdam

Mon, 04 Jul 2011 15:05:31 +0000

What alternative investments should we be considering in order to keep the value of our monies intact? Is it too late for gold, what about silver, or oil or any other precious commodity? No one seems too keen on keeping their savings in US Dollars either.

So what options could we consider in these interesting times? Does history have the answer for us?

Just imagine living back in the seventeenth century and seeking out independent financial advice. Even then it was important to preserve your wealth as well as look for opportunities for growth. How would you have responded if the advice given to you then was to ‘Buy tulip bulbs’?

In 1593 tulips were first imported to Holland. The introduction of this unique flower made it widely sought after in the country. The bulbs, due to a mutation, started to come in all different variety of colours. This made them very attractive and led to dealers in 1636 and 1637 to start dealing in these bulbs in a big way. Speculation on the tulip bulbs took off. ‘Tulipmania’ had arrived in Holland.

For some reason, which we today can find hard to understand, prices started to rise quickly as everyone felt that they must have one, after all the more bulbs you had, together with the different strains of colour, became an important reflection of your status in society.

Before long the Dutch were willing to pay more and more for these bulbs, utilizing their entire savings and selling other assets such as property, animals and even dowries in order to get more tulip bulbs. In true ‘bubble’ fashion the tulip managed a near twenty fold increase in value in one month alone. At the peak of the market one bulb reached the price of a house in Amsterdam! All of this down to good old ‘supply and demand’ economics.

However as with the ‘Emperor who wore no clothes’, questions were asked. Then the price suddenly began to drop rapidly which led to people panicking and then selling their tulips regardless of whatever losses they might incur. Government attempts to halt the crash failed. Many lost their entire savings or even went bankrupt.

The moral of the story – If you wish to impress your wife/girl friend, stick to diamonds! If you wish to preserve your wealth, make an appointment to see a good Independent Financial Adviser. We have a choice of four.

Call 01626 833225 to find out more.

The Modern Financial Planner

Mon, 20 Jun 2011 08:21:32 +0000

Financial Advisers and Planners aren’t all the same.

Some financial advisers are focused on selling products. In fact their whole business proposition revolves around selling financial products and their route to being paid is to receive commission for the products sold. That has been a common public perception of financial advisers for many years.

Unfortunately, sometimes this whole process revolves around the need to sell you products in order for the adviser to be paid.

Consequently, some people don’t take advice – such inaction could have a significant detrimental impact on their financial future.

Often when meeting with new clients I am confronted with a large bundle of policies and plans and usually the words from the client along the lines of ‘I don’t understand what all this is’ or similar.

This is because they have been sold products which bear little relationship to what they want to achieve (their goals). I am not surprised they don’t understand the paperwork. These plans have little meaning for them.

How many times have you heard ‘You need a pension!’ or ‘You need life insurance!’ Are these statements motivating to you in planning your financial affairs? I don’t think that they are.

As modern financial planners we operate with a different approach and focus our attention on what is important to you about your money.

We will help you to explore your goals in life and formulate a financial plan, so that your finances fully support those goals.

Planning in this way isn’t the preserve of the very wealthy and is relevant to everybody.

If you’d like to get started and take control of your finances please feel to call us on 01626 833225 to find out more.

Charity Golf Day in aid of Cancer Research – 2011

Fri, 17 Jun 2011 14:45:32 +0000

Loughtons & Lameys are delighted to announce that they will be holding their 7^th annual Charity Golf day on Thursday 7^th July 2011 at Stover Golf Club.

Over the previous 6 years we are pleased to report that we have raised over £24,000 in aid of various charities including Cancer Research who have been the biggest beneficiary and are once again the main focus this year.

If you are interested in entering a team, please contact Richard Loughton on 01626 833225 or email him at Richard@www.loughtons.co.uk

Greece is the Word

Thu, 16 Jun 2011 19:17:53 +0000

The concerns over Greek debt are weighing heavily on the stock market as those in power failed to agree a second bail-out of debt-stricken Greece.

As investors, it pays to remind ourselves that stock markets react to sentiment in the short term. In fact they react very quickly and are incredibly sensitive.

As Warren Buffett, the American investor, industrialist and philanthropist put it –

“In the short run, the market is a voting machine, but in the long run, it is a weighing machine.”

What’s not helping is the lack of clarity from the authorities, which creates uncertainly and worry that’s driving down stock prices, as the markets anticipate the ‘worst case scenario’.

Even if Greece successfully restructures its debt, the concern is whether it will default on its obligations.

Our clients in the main are not investing over the short term so the sentiment of the day is not a concern to them. On the contrary, they are playing the long game, remaining patient and in conjunction with our help, ensuring that they are not falling foul of some of the common investment mistakes:

Following the crowd.
Investing into areas that you do not understand.
Failing to ‘diversify’ your investments. What proportion of your total “net worth” consists of property assets for example?
Following the latest investment ‘fashion’ rather than building a sensible, well diversified investment portfolio.
Investing when markets are high and selling when they are low.

Warren Buffett sums this one up again when he said – “Risk comes from not knowing what you’re doing.”

At Loughtons we can help you to invest effectively by avoiding these and other common mistakes.

If you would like to discuss your own circumstances or wish to make a positive difference to your own finances, please feel to call us on 01626 833225 to find out more.

Changes to the way you receive Financial Advice

Fri, 03 Jun 2011 09:40:50 +0000

The Financial Services Authority (FSA) has recently publicised its proposed changes to the way that financial advisers must operate from 31st December 2012.

The FSA has been working with firms, advisers, consumer groups and industry experts to improve how investment products and services are recommended to potential investors. This process was called the Retail Distribution Review (RDR).

You can find out more from the FSA website by clicking here. Please note that Loughtons Independent Financial Advisers is not responsible for the content of external websites.

We have also written a brief guide to the retail distribution review, available here or by visiting the guides section of our website.

What has Loughtons done to prepare for these changes?

Whilst some advisers and firms have had a ‘head in the sand approach’ Loughtons began transitioning it’s business and services to clients to meet and exceed the demands of the RDR in 2007, well ahead of the deadline for implementation. For example, all of our advisers are already qualified beyond the minimum level outlined under the new proposals (QCF Level 4).

If you require further details or wish to make a positive difference to your finances, please feel to call us on 01626 833225 to find out more.

New Tax Year 2011

Mon, 09 May 2011 14:24:27 +0000

Too often people leave their tax planning to 4th April, which limits their options for keeping hard-earned cash out of the taxman’s clutches. Instead, make this new tax year the year you take control and plan ahead to make sure you make the right choices.

Sensible plans

Each tax year, there are a number of issues worth fresh consideration:

1) Use your allowances

You get a tax-free allowance for both income and capital gains. How can you use these as efficiently as possible?

2) Maximise your pension contributions

The latest regulations mean you can now get tax relief on pensions contributions of up to 100% of your salary each year (subject to annual and lifetime limits). How can you maximise your contributions – and select the right pension or investments – to build towards that secure retirement?

3) Consider tax advantageous investments

You also get an annual ISA allowance to help shelter your investments from further income and capital gains tax. Investment is also flexible, allowing access to a range of options – from the secure building society accounts right through to higher risk equity options. Could early consideration of the options help you make more of this year’s opportunity?

4) Plan your inheritance

Following the Government’s announcement back in 2007, the IHT allowances have increased for married couples and civil partners. Is it time to take a closer look at the value of your estate?

Further information
At Loughtons, we have the experience – and the research capabilities – to make sure you make the most of all the tax planning opportunities available to you.

The tax year end comes round all too soon so if you would like help, please give us a call on xx now. It could save you a great deal.

If you wish to make a positive difference to your finances, please feel to call us on 01626 833225 to find out more.

Loughtons Independent Financial Advisers is a trading name of JPRS (South West) Limited. JPRS (South West) Limited is authorised & regulated by the Financial Services Authority.

Note: The Financial Services Authority does not regulate tax advice

Budget 2011

Mon, 09 May 2011 12:11:56 +0000

Chancellor nails his colours to the mast George Osborne’s second Budget focused on measures to boost entrepreneurship and support businesses in the UK but he had less welcome news for the country’s banks and oil and gas companies

Delivering his second Budget in less than a year, Chancellor of the Exchequer George Osborne admitted economic growth in the UK is likely to be somewhat weaker than expected. Nevertheless, he described his Budget as being “for growth”. He focused on measures to boost entrepreneurship and support businesses in the UK, although these measures were accompanied by an increased levy on UK banks and a surprise windfall tax on North Sea oil and gas companies.

Fuel in the tank
In order to alleviate the effects of soaring petrol prices, the Chancellor announced the rise in fuel duty – originally scheduled for April 2011 – will be delayed until 2012. Fuel duty is to be cut by a further 1p per litre and the annual “fuel escalator” rise of 1p above inflation has been cancelled until 2015.

Osborne also introduced a fuel price stabiliser to control the cost of fuel at the pumps. These measures will be financed by an additional tax on North Sea oil companies of £2bn per year. This news was not well received by industry body Oil & Gas UK, which warned the levy might increase the UK’s dependence on imported oil and gas.

Giving with one hand? …
The personal tax allowance for individuals was increased by £630 to £8,105 from April 2012, a measure that will also benefit those paying the higher 40% tax rate. However, pensioners will not benefit from any increase in allowance. The top tax rate of 50% remains intact for now, although Osborne warned it would cause “lasting damage to our economy if it were to become permanent.”

Last year, the Chancellor announced tax credits, benefits and public service pensions would cease to increase in line with the Retail Price Index and would instead increase in line with the lower Consumer Prices Index (CPI). Thresholds for direct taxes will now follow suit, increasing in line with CPI, and this change will mean many people will have to pay a higher rate of tax in future.

The Chancellor also announced a consultation about possible measures to merge income tax and National Insurance – a move that would ultimately increase transparency. Elsewhere, 10,000 first-time buyers are to be helped onto the housing ladder and given assistance to buy newly built properties.

Open for business
As part of his drive to ensure Britain is “open for business”, the Chancellor increased this year’s planned 1% cut in corporation tax to 2%. The rate of corporation tax will be reduced by 1% every year over the next three years, bringing it down to 23%. However, the levy on banks will be adjusted to ensure they do not benefit from the reduced corporation tax. Excessive red tape will be removed to help businesses, and 21 new “enterprise zones” are to be created.

Reduced expectations for UK economic growth
The Office for Budget Responsibility believes the measures contained in the Budget are unlikely to have any material impact on the UK’s long-term potential for growth. The Chancellor was forced to downgrade expectations for UK economic expansion, announcing a cut in the government’s growth forecasts from 2.1% to 1.7% in 2011, and from 2.6% to 2.5% in 2012. Inflation is expected to remain high – at between 4% and 5% – during 2011, but is forecast to decline to 2.5% during 2012.

Borrowing lower than expected in 2011
The forecast for government borrowing to fund the UK’s budget deficit during 2011 was reduced by £2.5bn to £146bn. Borrowing is expected to decline to £122bn during 2012, and eventually to fall to £29bn by 2015/16. National debt as a share of national income is expected to total 60% in 2011, peaking at 71% during 2012, and then subsiding to 69% by 2015.

Fiscally neutral
The Confederation of British Industry gave a cautious welcome to most of the measures, commenting: “This Budget will help businesses grow and create jobs.” Nevertheless, the CBI expressed some disquiet about the windfall tax on North Sea oil companies, warning it creates uncertainty for future investment.

Osborne described the measures as “fiscally neutral”, adding it was “not a tax-raising budget, but nor can we afford a giveaway”. He remains inhibited by the UK’s massive budget deficit, and is further constrained by the sluggish economy and the need to implement the raft of harsh spending cuts announced last year.

Notwithstanding the increased income tax allowances, any gains to households are likely to be more than offset by the effects of higher VAT, taxes and National Insurance contributions and reduced benefits. Nevertheless, the Chancellor shrugged off any anticipated criticism, stating, “Britain has a plan … and we’re sticking to it.”

If you wish to make a positive difference to your finances, please feel to call us on 01626 833225 to find out