5 important questions to ask your financial planner about investing

Two people having a discussion over a desk.

If you want to grow your wealth to reach your financial goals, investing can be a great way to do so. With low interest rates and rising inflation, holding too much of your wealth in cash can lead to its value being eroded in real terms.

Of course, there can be a lot to think about when investing, which is why it’s important to be able to make informed decisions. If you want to build your wealth effectively and reach your financial goals, here are five important questions that you should ask your planner.

1. Should I worry about market volatility?

In recent months, the global stock markets have experienced a significant amount of volatility. From the outbreak of coronavirus in 2020 to the recent Russian invasion of Ukraine, major world events have caused uncertainty in many markets and spooked investors.

Due to this, it’s understandable that you might be worried about the value of your portfolio. You may even be tempted to withdraw your money to try to protect it.

However, one of the most important things to remember when investing is that it’s “time in the market” and not “timing the market” that typically leads to positive returns.

While short-term volatility might seem scary, in the long term any temporary falls will often be erased by the general upward trend of markets.

As hard as it may seem, when you encounter a difficult period, it’s often best to remain calm and ride it out. Read our previous article to find out about how making decisions based on emotion, rather than logic, can affect your progress towards your financial goals.

2. What is risk tolerance?

When investing, your tolerance to risk is one of the most important factors. To put it simply, there’s typically a correlation between the amount of risk you’re willing to take in the stock market and how large your potential returns may be.

For example, government bonds are considered one of the safest investments, but their returns are likely to be steadier and more modest than other asset classes.

One factor that can affect your risk tolerance is how long you are planning to invest for. If you have a longer investing horizon, you may feel you can afford to take greater risks with your investments and this could also help you enjoy higher returns.

3. Should I invest in a sustainable way?

In recent years, there has been a rise in interest in sustainable investing. This strategy can help to align your investments with your morals, as you can gain peace of mind to know that not only is your money growing, but it’s also making the world a better place while doing so.

As we discussed in a previous article, there can be many benefits to investing according to ethical principles. For example, according to the Financial Times, over the past decade, more than half of sustainable funds have outperformed their equivalent conventional counterparts.

While this may sound good, it’s important to remember that there is still some debate as to whether this strategy can reliably outperform in the long term. As such, you may find that it isn’t right for your needs.

This is why, if you’re considering sustainable investing, it can be useful to discuss this option with your planner first, so you can make an informed decision.

4. Will inflation affect my investments?

In recent months, there has been a sizeable spike in the rate of inflation. According to figures from the Office for National Statistics (ONS), the Consumer Price Index rose to 9% in the year to April 2022. As such, you may be concerned about how this will affect your portfolio.

To put it simply, a high rate of inflation reduces the real returns on your investments. Even if they may show a decent rate of growth, their value in real terms might not be increasing by as much as you may think.

With that in mind, to achieve higher returns, it may be necessary to raise your risk tolerance. This can help you to maintain your progress towards your financial goals, even during periods of high inflation.

Of course, as we mentioned earlier, exposing your wealth to greater risk isn’t a decision to be taken lightly. It’s always a good idea to discuss investment ideas with your planner, so you can decide what’s right for you, taking all your circumstances into account.

5. How is my portfolio diversified?

When building a robust portfolio, diversification of assets can be essential to protect your wealth during periods of economic volatility. Essentially, this is the practice of not putting all of your eggs into one basket!

Having a healthy variety of different asset types (such as bonds and equities) from a variety of sectors can help to protect you in the event of a market downturn. Even if a portion of your portfolio falls in value, this loss may be counteracted by growth in a different sector.

Diversifying your assets helps you to achieve more consistent outcomes, as well as lowering the risk of setbacks caused by market volatility.

If you want to know more about how we protect your portfolio from shocks through sensible diversification, get in touch and we’ll be happy to discuss your long-term strategy with you.

Get in touch

If you want to know more about how we can help you to invest more effectively, get in touch. Email enquiries@bowmorefp.com or call us on 01275 462 469.

Please note:

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Bowmore Financial Planning Ltd is authorised and regulated by the FCA.

29.6 million UK adults don’t have a will and haven’t completed an “expression of wish” form. Have you?

An unsigned document on a table with a pen.

Throughout your working life, you’ll probably build up a substantial amount of pension wealth. While you may be relying on it to provide you with a comfortable retirement, you may also want to leave some to your loved ones when you pass away.

If you want your family to inherit some of your pension wealth, having an “expression of wish” form can be invaluable for gaining more peace of mind. Despite this, a recent study by Canada Life shows that almost three-quarters of Brits haven’t completed one.

Without putting your wishes in writing, they may not be respected when the time comes to distribute your remaining pension funds. Read on to find out why having proper documentation can help you to manage your estate.

Pensions are normally exempt from Inheritance Tax (IHT)

Your pension is one of the most important assets that you’re likely to have and may represent a significant portion of your total wealth. During your lifetime, you’ll probably invest a lot into it and carefully manage it to help it grow.

As such, it should be able to support you throughout your retirement, however you may want to enjoy it. Whether you plan to spend this time taking long foreign holidays or mastering your hobbies, your pension should be able to provide you with enough wealth throughout.

Of course, this all sounds ideal but there’s one aspect of your pension that you may not have thought about – what will happen to it when you pass away?

If you manage your wealth carefully, you may have a large amount left over when you reach the end of your life, even if you’ve enjoyed several decades of luxury.

As such, you may want to leave some of your assets to your loved ones, so they can benefit from your hard work too. This may even help them to enjoy comfortable retirements of their own!

However, if you don’t properly document your wishes before you pass away, this could pose a problem when the time comes to divide your pension wealth.

An expression of wish document can give you greater peace of mind

When you pass away, one of the responsibilities of your pension trustee or administrator is to distribute your remaining assets.

To avoid your wealth not being passed on how you would have wanted, having an expression of wish form can enable you to nominate a beneficiary for your pension assets when you pass away. There are no limits on the number of beneficiaries that you can nominate, and you can alter the document if you later change your mind.

This form can be particularly important if you have a partner who relies on your pension wealth to support their lifestyle. For example, if they chose not to work so they could instead raise your children, they might struggle to get by once you pass away.

Having the proper documentation can enable you to know that your wealth will be distributed according to your wishes when you die, giving you one less thing to worry about. If you don’t have one in place, you have no guarantee that your assets will be divided the way that you want.

Having a comprehensive will in place can give you greater peace of mind

While nobody likes to consider their own mortality, planning ahead for when you do eventually pass away can be useful. Knowing that your wishes will be respected after you’ve died can give you much greater peace of mind.

One of the best ways to ensure this is to have a comprehensive will in place that covers every aspect of your finances. This will help to ensure that your wealth goes to the people you want it to when the time comes.

Having one can also be particularly useful if you want to leave some of your wealth to a stepchild or cohabiting partner. If you pass away without a will – known as dying “intestate” – then the laws of intestacy determine how your estate is divided.

The criteria they apply usually prioritises certain family members over others, which could result in someone you want to receive your money being unable to.

If you want to put a will in place, we can signpost you to a specialist legal firm who will work with you to decide how you want your assets to be distributed. This can enable you to rest easy, knowing your loved ones won’t struggle financially after you’ve passed away.

Get in touch

If you want to know more about putting a will in place to avoid any estate issues, we can help. Email enquiries@bowmorefp.com or call us on 01275 462 469.

Please note:

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

Bowmore Financial Planning Ltd is authorised and regulated by the FCA.

6 important things to know about your pension savings on divorce

Couple sitting apart on a sofa, signing a divorce agreement.

Pensions are often the single biggest asset for divorcing couples and, according to figures from the Office for National Statistics (ONS), make up 42% of total household wealth. To put this into perspective, the share of wealth held in property is just 36%.

Changes to the law in 2000 allowed divorcees to share pensions, yet, according to research, few divorcing couples seem to take this into account.

Matrimonial Property is one area where solicitors may be brought to account many years after the divorce has concluded if pensions have been ignored.

In fact, 58% of people who took part in a Which? survey said pensions weren’t even discussed during their divorce proceedings.

Now, with the introduction of the “no-fault” divorce rule, which came into force in England and Wales in April, it is more important than ever for divorcing couples to understand the impact that separation could have on their finances and retirement plans.

There is now no need to play the blame game and clients who are committed to sorting their divorce amicably are able to do so through less adversarial methods such as mediation, often with the assistance of a Financial Neutral – a financial planner who assists both parties in divorce cases.

If you don’t understand the financial products you have amassed as a couple, you can’t make informed decisions and this can slow down the process.

A Guide to the Treatment of Pensions on Divorce “The PAG report” in July 2019 stated: Ignoring the pensions or stating on the D81 that “the clients have agreed to ignore the pensions” is not an option.

So, with all that in mind, here are six important things to understand when it comes to dividing your pension savings on divorce.

1. Pensions should be treated as matrimonial assets

Many people don’t realise that a pension is considered a matrimonial asset in a marriage. This is the case even if only one spouse has accrued pension savings as both parties are considered to have contributed equally to the marriage.

Unfortunately, even before divorce complicates matters, pension wealth is unequally distributed between married men and women.

A study carried out by the University of Manchester showed the average married woman aged between 65 and 69 has just £28,000 in pension wealth. Meanwhile, the average man has almost 10 times that.

 

Source: University of Manchester

With fewer than 15% of couples having pensions of approximately equal value, failing to split pension savings during divorce can leave women significantly worse off.

Although in Scotland, only pension rights built up during the marriage or civil partnership will be regarded as marital assets, in the rest of the UK, all pension assets are usually treated as marital assets in needs cases.  A sharing basis where there are significant assets may ringfence pensions built up prior to the marriage in the rest of the UK.

2. Pension savings are often the biggest asset in a divorce

In some cases, pension funds can be worth more than the house you share.

However, when discussing the division of assets, some women are advised to focus on the family home, especially in cases where children are still living at home.

While it may sound sensible for one of you to take the house and the other to get the pension pot, when it’s time to retire, the partner who took the property could find themselves without any income to live on.  There are several methods of splitting the family home and this all needs consideration in the round.

If this happens, the person who kept the property may be forced to sell the house to generate the income needed in retirement.  Particularly as spousal maintenance only tends to fund until retirement and may not consider income requirements into retirement.

This is why it’s so important that both parties consider pension assets during divorce, that these are distributed on a needs/sharing basis and that all options are considered for both pensions, the marital home and other assets to get the best outcome for both parties going forwards.

3. Understand what kind of pension arrangement you have and get an up-to-date valuation

When you’re discussing how to split your assets, start by getting a valuation for your pension(s).  With a letter of authority, a Financial Planner can assist here and ensure all the right questions are asked in terms of the options for splitting the pension to aid discussions.

A final salary or defined benefit (DB) pension can be particularly valuable, as it is based on how many years you’ve worked and the salary you earned. If either of you have a final salary or DB pension, you’ll need to think carefully and plan how it will be divided.

When pensions are involved in your financial settlement, it’s worth getting advice from an expert financial planner who can work alongside an actuary, if required.  A financial planner can help you understand how to divide the assets on a Needs/Sharing basis and illustrate how decisions surrounding your pension funds will affect your future retirement plans.

4. 3 ways your pension savings could be divided

There are three main options for dealing with pensions in a divorce:

  • Offsetting their value against other assets
  • Sharing them on a clean break basis
  • One partner earmarks some of the income to be paid to their ex-spouse after retirement.

Here’s how each option works in practice…

Offsetting their value against other assets

As the name suggests, with offsetting, the value of any pension is offset against the other assets.

This means that if, between you, you own a property worth £300,000 and a pension worth £300,000, one of you might choose to keep the pension while the other keeps the property.

There are some drawbacks to dividing assets using offsetting.

For example, the party who takes on the property may need to sell it to generate income to live on in later life. There may also be significant costs for maintaining a property that you should also take into consideration.

Conversely, there are significant tax benefits in owning a pension. Pensions offer tax relief on contributions, and, unlike property, pension funds typically fall outside your estate for Inheritance Tax purposes.

Pension sharing for a clean break

With pension sharing, the pension benefit is split and divided between both parties at the time of the divorce. The partner without the pension will get a share of the pension benefits transferred into their name.

The good thing about this method is that it ensures a ‘clean break’ and both parties know exactly what proportion of the pension they will receive or keep on divorce.

One partner earmarking some of the income to be paid to an ex-spouse after retirement

Earmarking, also referred to as a “pensions attachment order”, allows the partner without the pension to receive income or lump sum payments from it in the future.

Pension benefits are effectively “earmarked” for the other party in retirement. If the pension scheme member dies, the court can order that some or all of the survivor pension or lump sum death benefits be paid to the other partner.

The main drawback with this method of pension division is that the party without the pension must wait until their ex-spouse retires or dies before they receive any pension benefits.

Another problem with this approach is that the recipient of the “earmarked” benefits has no control over the investment decisions their ex-partner may take.

5. There’s no set formula as to how your assets will be divided

Should you end up settling your divorce in court, the judge will seek to achieve a settlement based on each party’s needs. Typically, separating couples start at a 50:50 split, but this may be adjusted if it fails to meet each party’s needs.

Because each divorce settlement is different, the treatment of any pensions will also vary from case to case.

6. Once the dust settles, get on top of your retirement plan

If you lose a portion of your pension savings as part of your divorce settlement, it’s wise to start saving to make up the difference as soon as possible.

Using intelligent cashflow modelling, we can help you visualise what the sum lost will mean for you and your retirement plans and create a plan to help you rebuild your retirement savings.

If you need advice on how to split your assets during a divorce proceeding, we can help. Seeking expert advice will help you to rebuild your resources and limit the negative effects of giving away a portion of your pension.  In some cases, it may even be beneficial to give up some of your pension if you’re close to the Lifetime Allowance and are able to re-build your pension with the benefit of higher rates of tax relief.

Get in touch

To learn more about how to protect your financial interests when you’re getting divorced, or if you want help planning your new future following separation, get in touch. Email enquiries@bowmorefp.com or call us on 01275 462 469.

Bowmore Financial Planning Ltd is authorised and regulated by the FCA.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Your pension income could also be affected by the interest rates at the time you take your benefits. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

How to make your pension last a lifetime in a world of high inflation

An older couple filling out forms

In recent months, you can’t have missed the headlines that the UK is undergoing a large spike in the rate of inflation. According to data from the Office for National Statistics (ONS), the Consumer Price Index rose to 9% in the year to April 2022.

As you might imagine, prolonged inflation can seriously affect your progress towards your long-term goals. This is especially true when it comes to retirement, as the wealth you accrue for this important chapter of your life may need to last for several decades.

If you’re concerned about the recent rise in the rate of inflation, read on to find out some useful tips for helping your pension to last a lifetime.

Even a relatively low rate of inflation can pose a problem for you in the long term

On a national scale, a small amount of inflation can be useful as it helps to keep the wheels of the economy turning. This is why the Bank of England (BoE) has an annual target of 2%, as the gentle upwards pressure on prices helps to encourage spending.

Of course, for the individual, it is a different story. In the long term, even a small amount of annual inflation can be problematic for your finances. One of the best ways to see this is with the BoE’s inflation calculator, which can show you the effect of rising prices over time.

According to this, goods and services that would have cost £10,000 in 1991 cost £22,844 in 2021. This is due to an average annual inflation rate of 2.8% over the 30-year period.

As we discussed in a previous article, thanks to advances in medicine and technology, you may enjoy a much longer life than your parents or grandparents.

Of course, this can be something of a double-edged sword as while you may get to enjoy your retirement for longer, your pension wealth might also have to support you for a greater period of time.

With this in mind, it’s important to inflation-proof your finances so that you don’t run into any unexpected problems when the time comes to retire.

You may need to reassess your tolerance to risk when investing

One of the most serious ways that rising inflation could affect your long-term plans is that it reduces the real returns of your investments.

For example, if your portfolio grows in value by 5% in a year, this may seem like a strong rate of return. However, if during this same time frame, the rate of inflation rises to 4%, then your real return is only 1%.

This is obviously a problem, as with reduced growth you may not have enough wealth to support your desired lifestyle in retirement. To remedy this problem, you might need to make your investments work harder for you.

If you want to achieve stronger growth, you may have to raise your risk tolerance when investing.

Typically, the greater amount of risk you are willing to tolerate, the greater the potential return. This can help you to outpace the rate of inflation and maintain your progress towards your financial goals.

Of course, exposing yourself to more risk can sometimes pose problems of its own, especially during periods of volatility. This is why, if you’re considering a change of investment approach, it can be useful to seek professional advice, so that you can make a properly informed decision with your wealth.

Finding a sustainable withdrawal rate can help your pension funds last longer

If you want to ensure that your pension can support you throughout retirement, it’s important to find a withdrawal rate that’s right for you. This can be a critical part of long-term planning, as taking too much can quickly deplete your funds.

This can be easily done if you don’t know how much a sustainable amount is. According to a recent report by the Financial Conduct Authority, more than two-fifths of retirees surveyed were making withdrawals of 8% of their funds each year.

During periods of high inflation, when rising prices are eating away at the value of your wealth, it’s more important than ever to know how much you can sustainably withdraw from your pension.

If you want to be able to make properly informed decisions with your pension wealth, working with a planner can really benefit you. They can help you thoroughly assess your goals to ensure that you have enough to support your desired lifestyle throughout retirement.

In this important chapter of your life, money worries are the last thing you need. Working with a professional can help to give you greater peace of mind to know that you’re building your retirement wealth as effectively as possible.

Get in touch

If you’re concerned about the impact that inflation could have on your long-term plans, we can help. Email enquiries@bowmorefp.com or call us on 01275 462 469.

Please note:

This article is for information only. Please do not act based on anything you might read in this article.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

The value of your investments can go down as well as up, so you could get back less than you invested.

Bowmore Financial Planning Ltd is authorised and regulated by the FCA.

Bowmore Bulletin: Your latest update from the Bowmore team

cycling

Every month, we give an update on the goings-on of the Bowmore team. From sporting achievements to award wins, to babies born – and everything in-between – we are always delighted to share our news from Bowmore HQ.

This month, there is much to report. We have proudly celebrated an award win; appeared in the press; congratulated a colleague on exam success and continued our charitable endeavours.

Bowmore Asset Management wins the 2022 Suggestus 3D Award, presented by ARC Limited

At Bowmore, we constantly strive for excellence in all areas of our work. We are absolutely thrilled that we have been named winners of the 2022 Suggestus 3D Award, presented by ARC Limited.

This award is presented in recognition of Bowmore Asset Management’s “ongoing commitment to transparency, engagement and integrity” in the field of asset management.

The ARC Group performs essential investment research for a global clientele, holding impeccable standards of transparency and integrity in their work and setting the bar high for the rest of the industry.

We are honoured to have been recognised for our dedication to these practices and offer our sincere thanks to the ARC Group.

Bowmore in the press

Once again, Bowmore has been featured by multiple press publications this month, including FTAdviser and Money Marketing.

Bowmore research featured in FTAdviser

Our recent research found that the number of people reaching age 100 could hit 78% by 2041.

Discussing the issue with FTAdviser, Bowmore financial planner Helen Thomas said: “There are a number of financial planning implications that could occur if these predictions come true. The first that comes to mind is the sustainability of our current pension system if people live 30 – 40 years past retirement age.”

Our findings featured in Money Marketing

In other news, Bowmore’s research on the number of Inheritance Tax (IHT) receipts was published by Money Marketing in April 2022.

Money Marketing reports, “Bowmore Wealth Group believes the key drivers of the increase have been the rapid rise in residential property prices and a freezing of the tax threshold, both of which have seen more estates become liable to pay IHT.”

You can read both stories in full on the FTAdviser and Money Marketing websites.

Tom Henshaw completes final exams to achieve Fellow status

Back in December 2021, you read about one of our financial planners, Tom, passing the J05 Pension Income Options exam.

Now, just a few short months later, Tom has passed his final exam to become a Fellow of the Chartered Insurance Institute (CII) at the age of 26. Congratulations, Tom!

We caught up with Tom about his phenomenal exam achievements and heard about what’s next for this talented young individual.

Can you tell us a bit about which exam you took?

“My final exam was AF4 Advanced Investment Planning. In passing that, I achieved the Advanced Diploma in Financial Planning, as well as the required number of credits to be awarded Fellow of the Personal Finance Society, the highest accolade within the CII framework.

“The actual module was one of the better exams for me – I found the content very interesting, which always helps with the studying!”

How does it feel to have reached this milestone so quickly?

“It feels fantastic. I started studying for my CII exams straight out of university, so I haven’t had a break from exams for a long time.

“At the outset, I set myself the target of achieving fellowship within five years of starting out, which I have now done. For the time being, at least, I can now have a break from formal study.”

What are your next steps now that your exams are completed?

“There are no further technical qualifications I need to complete, but there are still plenty of areas for development.

“I plan to work on other important aspects of the profession, such as communication and presentation skills, to ensure I am explaining things as clearly as possible to my clients.”

Have you done anything exciting to celebrate your success?

“My wife and I shared a bottle of champagne and visited Bristol Zoo. Considering I’m a biology graduate and she’s a vet, it’s always one of our favourite days out!”

What are your goals for the next few years?

“I want to continue to develop and become the best financial planner I can be, keeping my technical knowledge up to scratch while really developing my communication and problem-solving skills.

“I’d like to say a big thank you to the team at Bowmore and everyone who helped me along the way.”

Mark and Duncan continue to train for the Ride for Precious Lives

As you may have read in previous months’ updates, two of our colleagues, Mark Millet and Duncan Harvey, are training for a charity bike ride called the Ride for Precious Lives.

The 225-mile Ride for Precious Lives is being completed in July, in support of Children’s Hospice South West (CHSW), a charity centre providing care to seriously ill children and their families.

Mark Millet became involved with CHSW after Emily, the daughter of Mark’s dear friend and fellow cyclist Mark Paxford, passed away. Together with other riders, they have formed an aptly named “Team Emily” and will be cycling as a group throughout the event to raise funds for this amazing charity.

Mark and Duncan have been working hard to prepare for this event since the start of the year. Let’s hear from them about how their challenging training is going as April and May bring warm spring weather to our doors.

Words from Mark Millet

“As we move from April into May, the serious training moves forward for us cycling chaps!

“Duncan and I finally managed a joint training ride a couple of weeks ago with the other Team Emily riders.

“This was an incident-filled field ride, as Steve C managed to break his bike, while Steve P skidded on gravel, came off his bike and cracked a rib! As you can see, this cycling lark is filled with lots of trials and tribulations. We did, however, manage to make it to Sherston for a very welcome cup of tea and a flapjack.

“As we now increase the distances cycled in each session – we are up to more than 50 miles now – the subject of education and nutrition becomes a more serious matter. We are all trying different drinks and snacks that will sustain us for longer rides. Without a good strategy, you just won’t make it through the day!

“I am going shortly for my follow-up bike fit, to overcome the knee pain and improve my general comfort on the bike. More to report on this later.

“Mark Paxford, our Team Emily leader, has injured his hip playing an extremely dangerous round of golf – don’t try this at home – but after some physiotherapy, he is making good progress and will shortly be back into training.

“Turning to the fundraising efforts, we are currently sitting at just over £2,300. Duncan and I are absolutely gobsmacked!

“Given the other issues going on in the world, our supporters have been very generous. Once we factor in the Gift Aid increase, and the fact that Bowmore will match our efforts, we are now going to be able to help this charity in a really meaningful way. Let’s keep going – who knows where we will end up!

“There are around nine weeks to go in our training before the event and we are redoubling our efforts to fundraise and train without too many injuries. Fingers crossed.”

Donate to the Ride for Precious Lives

If you are inspired by Team Emily and their efforts to raise money for CHSW, you can get involved.

Visit Mark and Duncan’s JustGiving page to donate, or scan the QR code, to help bring life-altering care to children who need it the most.

5 surprising things you never knew about the Queen

black and white photograph of Queen Elizabeth II

Queen Elizabeth II’s Platinum Jubilee will be celebrated from Thursday 2 June to Sunday 5 June 2022, marking a 70-year rule for England’s longest-reigning monarch.

As you will already know, Queen Elizabeth II ascended the throne unexpectedly. After her father, King George VI, passed away suddenly from a coronary thrombosis on 6 February 1952, Elizabeth automatically assumed the role as head of state at just 25 years old.

As Brits, we all know that the Queen has reigned through her fair share of trials and tribulations. But there are fun, little-known facts about Elizabeth II that act as a testament to her intriguing personality and stoic attitude.

Read on to find out five things you may never have known about Queen Elizabeth II.

1. The Queen has never given an interview in her entire reign

The Queen is a ubiquitous figure in British culture, her face appearing on everything from mugs to money – so it may surprise you to learn that she has never given an interview during her reign.

Although there have been many famous royal interviews over the years, these rarely seem to have provided positive publicity to the family. Princess Diana’s infamous chat with Martin Bashir and Prince Harry’s latest televised conversation with Oprah seem only to have stirred controversy – so it’s no surprise the Queen has declined to be interviewed.

After staying tight-lipped for 70 years, it is unlikely we will ever sit down to watch or read an interview with the Queen. However, there are several royal biographies where we can learn about her life in detail.

2. Elizabeth II worked as a mechanic during the second world war

Although the Queen is best known for her pristine public appearances in brightly coloured garments and jewellery worth millions, she is not afraid to get her hands dirty.

Indeed, Queen Elizabeth II rolled up her sleeves during the second world war and, in 1945, worked as a mechanic as part of her service to the country. She underwent a six-week training programme in Aldershot, Surrey, before joining the Women’s Auxiliary Territory Service under the name Elizabeth Windsor. During her service as a mechanic, Elizabeth changed tyres, repaired Jeeps and rebuilt car engines.

Although in the modern day this act is looked upon with admiration, Elizabeth fought with her family over the decision at the time. Reports claim the royal family did not approve of her desire to train as a mechanic, but she persisted and eventually got her way.

3. She was asleep in a treehouse when she became Queen

If you have watched Netflix’s The Crown or you closely follow the royal family, you will know that Elizabeth II’s father, King George VI, died while she was on a royal visit to Kenya. But you may not know that, at the time of her father’s death, the Queen was actually asleep in the branches of a tall tree.

Indeed, Elizabeth and Prince Philip stayed at Treetops, a hotel that consists of treehouse structures built specifically for the observation of wildlife, during their Kenyan visit. While they slept surrounded by elephant, leopard and baboon, she unknowingly became Queen when her father passed away during the night.

As she is famous for her outdoor adventures – riding horses, driving cars and hunting – it may not be surprising to learn that Elizabeth’s first moments as Queen saw her high in a tree surrounded by ferocious nature.

4. The Queen and her sister, Princess Margaret, once partied incognito in London

When the second world war ended on 8 May 1945, London’s streets were lined with people, all ecstatic at the closing of a terrible chapter in British history.

Two people who were also thrilled at this news were the Queen – then Princess Elizabeth – and her sister, Princess Margaret. They wished to celebrate alongside the rest of London’s citizens, so they decided to go out and party incognito on the streets of the capital.

Quoted in an Instagram post by the royal family, the Queen says, “I remember lines of unknown people linking arms and walking down Whitehall, all of us just swept along on a tide of happiness and relief.”

5. The Queen has survived multiple assassination attempts

As you may expect, Elizabeth II has been the victim of many attempted assassinations. Unfortunately, as head of state, she is the ultimate target for acts of terrorism.

One thing you may not know, though, is that the Queen once narrowly escaped assassination while riding a horse.

During the 1981 Trooping of the Colour, a ceremony performed by the armed forces on the official birthday of the British sovereign, the Queen was shot at from close range while on horseback. It is reported by the BBC that Elizabeth appeared shaken, but quickly regained her composure.

In another incident, a man broke into the Queen’s bedroom in 1982, carrying a piece of a glass ashtray he had broken in the next room. It is said that the Queen calmly spoke to the man for several minutes while authorities made their way to the scene and emerged unscathed.

For many, the Queen has acted as a fearless force throughout the trying times Britain has experienced in the last 70 years, instilling pride in many citizens as she continues to reign in her old age.

Why putting the “money” conversation back on the table has never been more important for families

As the cost of living crisis continues to make life difficult for some families, money could be a frequent conversation in your home at the moment.

The rising cost of living, exemplified by a 40-year high in the rate of inflation, could be causing you financial stress, no matter your circumstances. According to the Commons Library, 83% of adults reported an increase in their day-to-day costs in March 2022.

For some families, money is a taboo subject that isn’t regularly discussed. If that sounds familiar to you, it could be that broaching the topic of money in these trying times has been challenging for you and your loved ones.

However, the cost of living crisis is providing families with the opportunity to open up conversations about money and communicate their goals more effectively.

Read on to find out why putting the “money” conversation back on the table has never been more important for families. Plus, discover how your Bowmore financial planner can help mediate these conversations and gain the best outcome for everyone involved.

Talking about your finances as a couple could save you arguments as well as money

A 2022 Royal London study has revealed that 62% of couples claim money is the leading cause of arguments between them. This could be prompted by a lack of communication where finances are involved.

Indeed, talking about money with your significant other might not be romantic, but it is fundamental to aligning your goals and ensuring you are on the same path.

Plus, sharing information about your individual incomes and inheritances with one another can save you money, as well as awkward discussions down the line.

Through financial conversations with your significant other, you could also maximise the efficiency of your money by utilising key tax allowances. Here are four allowances you and your spouse could maximise by working together on your financial goals.

  1. The £3,000 annual exemption amount

When you begin estate planning, it is important to consider how you and your partner can work together to reduce the amount of Inheritance Tax (IHT) your beneficiaries might pay.

The annual exemption amount allows you to gift up to £3,000 a year tax-free to whoever you choose. You can split this amount in any way you like. By giving this money as part of your children’s inheritance, you can reduce the value of your estate and allow them to pay less IHT when you pass away.

Crucially, this is an individual allowance. So, if you both wish to give money each year to adult children, you can bestow £6,000 a year between you.

For more insights on mitigating IHT, read our article on how to avoid being caught out by Inheritance Tax.

  1. Potentially exempt transfers

Although the annual exemption sits at £3,000, you can technically gift any amount of money to your loved ones. This is known as a potentially exempt transfer (PET).

If you gift an amount more than £3,000, you will not immediately be taxed. However, if you pass away fewer than seven years after the gift is bestowed, the gift will be subject to IHT.

Unlike the standard 40% IHT charge, PETs exist on a sliding scale, known as taper relief.

Source: HMRC

Remember, taper relief only applies to gifts in excess of the nil-rate band. It follows that, if no tax is payable on the transfer because it does not exceed the nil-rate band (after cumulation), there can be no relief.

Taper relief does not reduce the value transferred; it reduces the tax payable as a consequence of that transfer.

If you wish to mitigate your IHT liability over the years, it could be constructive to begin gifting sums of money as early as possible. If you make a PET earlier in life, it may be less likely to be subject to a tapered relief IHT charge.

3. The Capital Gains Tax allowance

You are liable to pay Capital Gains Tax (CGT) when you earn profits from selling certain assets, including:

  • Stocks and shares that aren’t in an ISA (or PEP)
  • Properties that aren’t your main residence
  • Personal possessions worth more than £6,000, excluding your car
  • Business assets.

The CGT allowance will stand at £12,300 until 2026.

However, just like the annual exemption amount, this is an individual allowance. So, by working together to sell assets individually, you could form a CGT “allowance” of £24,600 between both of you, helping limit your CGT liability in any given tax year.

4. The Marriage Allowance

If one spouse does not pay Income Tax, you can use the Marriage Allowance to mitigate the amount of Income Tax the other spouse pays.

A person who earns less than the Personal Allowance of £12,570 a tax year can “gift” up to £1,260 of their Personal Allowance to their spouse or civil partner, as long as they are a basic-rate taxpayer.

For example, if you earn £5,000 a year, you have £7,570 of your Personal Allowance left. So, if you transfer £1,260 of your Personal Allowance to your spouse who pays basic-rate Income Tax, their Personal Allowance will now equal £13,830. This means they will pay less Income Tax overall, as their Personal Allowance has increased.

Including your children in your estate planning conversations can help manage expectations

You may often discuss your inheritance plans with your significant other or financial planner. But have you ever discussed your estate plans with your adult children?

You may be surprised to learn that, according to MoneyAge, UK adults tend to vastly overestimate the inheritance they are due to receive. Indeed, the average UK adult expects to receive more than £130,000 in inheritance – when in actual fact, ONS figures show that the median inheritance sits at around £50,000.

Keeping your beneficiaries in the dark could lead them to have unrealistically high expectations of their inheritance. This might cause them to overspend on their current income. Worse still, it could cause family arguments and fractured relationships down the line.

Starting the estate planning process early and giving gifts within the annual exemption amount while you’re still alive could be extremely constructive for mitigating IHT.

By lowering the value of your estate before you pass away, your beneficiaries can avoid paying IHT on their entire inheritance – because they’ve received some of it through tax-efficient gifts already.

Aligning your goals as a family can help you achieve them more efficiently

If you and your family have opposing goals, dreams and ideals about your money, it could make it harder to stay on track with your savings and plan for the future.

Your Bowmore financial planner can mediate key conversations between you and your spouse or your adult children, to make sure you are on the same page and help you create a positive vision for your future.

Get in touch

In these trying times, everyone could do with financial support. If you would like to discuss your finances as a family, email enquiries@bowmorefp.com or call us on 01275 462 469.

Please note

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.

Bowmore Financial Planning Ltd is authorised and regulated by the FCA.

Bowmore Financial Planning Ltd is not regulated to provide tax advice.

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

US tech woes 

It has been a difficult week for equity markets across the board, especially for the US growth tech giants, which have experienced large drawdowns this year. Many international companies are being hit due to an aggregate of negative news: US gasoline prices seeing new highs, supply constraints, fears over a recession and in particular a strong dollar.

The earnings season for Q1 2022 in the US finished at the end of April, but results don’t reflect the negative moves we have seen in markets to date, with largely positive reports being made. Below is a roundup of the big tech names that have fallen in the past few months.

Apple (YTD -19.7%)

Apple’s Q1 results exceeded expectations across the board. The company generated a total revenue of $97.3 billion in the period (+8.6% year-on-year (YoY)), beating a consensus expectation of $94 billion. One of the rare large US tech stocks that is still outperforming the S&P 500 year-to-date.

Supply constraints caused by COVID-related disruptions are impacting their ability to meet consumer demand for products and this is particularly true for iPads. The Covid-related disruptions in China are also having an impact on demand.

Microsoft (YTD -24.1%)

Despite losing nearly a quarter of its value this year, Microsoft’s consolidated revenues grew by 18% YoY, beating the consensus estimates. This is the fourth year of consecutive double-digit quarterly revenue growth. Reassuring results drove a solid rally for the stock (+4%) the following day.

Amazon (YTD -35.9%)

Amazon was a clear winner during the pandemic when everyone was forced to shop online. Comparing earnings today with those seen during the heights of the pandemic was always going to be a tough ask. Nevertheless, Amazon’s earnings release for Q1 2022 did not justify the fall seen in the markets.

Revenue rose 7% YoY, compared to a 44% rise seen in Q1 2021. However, the revenue from Amazon’s online store fell 3%. This was only the second decline of revenue for Amazon, the first being in Q4 2021.

Amazon Web Services continued to grow (making up 30% of Amazon’s revenues) and is now becoming a large part of the overall income mix. This rise is slowly reducing Amazon’s exposure to online shopping.

Alphabet (YTD -22.1%)

Growth for Google has slowed quarter on quarter but is still in line with its pre-pandemic growth rate. Nine business segments for Google have now surpassed the one billion user mark (Android, Gmail, Google Drive, Google Maps, Search, Google Photos, etc.), and revenue is still growing at 20%+ per annum, which is remarkable at this level.

Bowmore Portfolios

These tech names have seen robust growth over recent years, especially during the Covid pandemic, which brought earnings forward for a lot of these companies. Markets have been re-rating these stocks year to date and they, along with the wider market, now trade at much more appealing valuations.

Within our diversified portfolios we do hold exposure to these sorts of tech names, as they represent a quality growth bias that remains attractive to our active managers, who will see opportunities in these volatile periods. As the macro backdrop shifts and some of the current challenges become clearer, investors will have time to take a breath and fundamentals will be allowed to drive sentiment further.

Source: Refinitiv – Market returns as at 12/05/2022

Wealth manager eyes £1bn AuM by 2025 with acquisition spree

Mark Incledon, CEO quoted in International Adviser, 12th May 2022

Bowmore Wealth Group is looking to get back on the acquisition trail as it targets £1bn in assets under management (AUM) by 2025. Bowmore had to put its acquisition plans on hold during the pandemic as the deal flow dried up as the uncertainty of Covid put may business owners plans on hold.

However, Bowmore is nearing completion of its first post-Covid deal with the acquisition of a small financial planning practice that specialises in dealing with the medical profession. This is the first of a few in Bowmore’s deal flow which represents the start of the Group’s plans to accelerate growth.

Bowmore Wealth Group is set to have around £400m in assets under administration by July this year.

Read more: https://bit.ly/3l4gEyt

3 easy ways to reduce tax on your investment portfolio

Happy couple doing paperwork on their sofa with laptop computer on the coffee table

Without experienced planning, tax can erode long-term wealth. Investing with a tax-efficient strategy also helps maximise potential returns and improve cashflow, bringing your financial goals closer.

For higher- or additional-rate taxpayers, tax-efficient investing is crucial. Fail to invest with a well-planned strategy and the difference between pre-tax and post-tax returns can be substantial.

There are several ways to invest tax-efficiently and reduce liabilities.

1. Use the right wrapper

Individual Savings Accounts (ISAs)

Everyone over 18 and resident in the UK is allowed to invest up to £20,000 in a Stocks and Shares ISA (for the tax year 2022/23). It’s also possible to save up to £9,000 (for the tax year 2022/23) for children through a Junior ISA.

Investments in an ISA grow in a tax-efficient way and so do not incur Income Tax or Capital Gains Tax (CGT) when sold.

We encourage every client to make use of the annual ISA allowance. If you already hold investments outside ISAs, deploy the “bed and ISA” strategy. This involves selling assets to realise a capital gain and then immediately buying back the same assets inside an ISA. After which, all future gains on the asset will be free of CGT.

Self-invested personal pension (SIPP)

Compared to other pension arrangements, a SIPP can allow more flexibility and investment options while still enjoying all the tax benefits associated with pension savings.

Tax benefits of pension savings include tax relief on personal contributions up to £40,000 per annum gross, and the ability to carry forward any unused allowance from the past three years.

By way of example, someone earning £120,000 in 2022/23, and who paid £30,000 into their pension in each of the tax years 2019/20, 2020/21, and 2021/22, would typically be able to pay up to £70,000 into their pension this year using carry forward.

This equates to the full £40,000 allowance for 2022/23 plus £10,000 of unused allowance carried forward from each of the past three years.

Offshore bonds

Used to invest money over the medium to long term, offshore bonds are tax-efficient because they don’t usually incur tax on investment growth. Withdrawals can also be made without being subject to Income Tax, up to a defined limit each year.

Trusts

Tax treatment on investments held in trust is different to personal investments. In particular, trusts are a useful way to protect and pass wealth to future generations while retaining control over investment decisions and payments to beneficiaries.

2. Take note of Capital Gains Tax

CGT is charged on profits made when selling, gifting, transferring, or exchanging assets, such as shares, collective investments, personal possessions worth £6,000 or more, and property that isn’t a primary residence.

Higher- and additional-rate taxpayers pay CGT at 20% on gains from investments. For basic-rate taxpayers, this rate may be reduced to 10%.

The CGT exemption allows tax-free gains of up to £12,300 in the 2022/23 tax year. Unlike some allowances, the CGT exemption can’t be carried forward into the next tax year – in other words, use it or lose it.

Strategic use of the tax-free exemption each year could reduce the risk of incurring a significant CGT liability in the future.

There are numerous ways to reduce CGT and retain more wealth. Managing CGT effectively can be highly complex and there’s a risk of paying it unnecessarily.

We can help you understand all options available to protect your portfolio from CGT, but here are two ways to help reduce your tax liability.

Make use of losses

It’s possible to minimise CGT liability by using losses to reduce the gain subject to tax. Unlike the CGT exemption, which is immovable, unused losses from previous years can be brought forward, as long as they are reported to HMRC within four years from the end of the tax year in which the asset was disposed of.

Transfer assets to your spouse or civil partner

Transfers between spouses and civil partners are exempt from CGT. To be eligible, transfers must be a genuine gift. Used effectively, transfers can double the CGT exemption for married couples and civil partners to £24,600.

3. Consider venture capital schemes

Venture capital schemes provide funding for relatively young companies in the early stages of the business cycle. For experienced investors, comfortable taking more risk with their capital, these schemes can provide attractive tax breaks.

The UK government has established three schemes, all offering tax advantages.

Enterprise Investment Scheme (EIS)

Designed to encourage investment in early-stage companies not listed on a stock exchange, the EIS  offers tax benefits such as:

  • Income Tax relief of 30%
  • No CGT on gains realised on the disposal of EIS investments, provided the investments are held for three years
  • CGT deferrals if proceeds are invested in qualifying EIS investments
  • Inheritance Tax (IHT) relief for investments held for two years.

Venture Capital Trusts (VCTs)

Unlike the schemes above, VCTs are investment companies listed on the London Stock Exchange and invest in smaller companies that meet certain criteria. Tax breaks include Income Tax relief of 30%, tax-free dividends, and an exemption from Capital Gains Tax on the shares, should they rise in value.

While offering generous tax advantages, these schemes are intended for investors comfortable with taking more risk with capital.

Talk to experts who care

We take tax seriously and work in conjunction with financial planners to provide solutions that protect and grow your wealth.

As legislation is subject to change, a tax strategy that saves money now may not work in the future. We keep a close eye on the ever-changing tax laws and will adjust your strategy accordingly when the goalposts are moved.

If you have any questions about the tax efficiency of your investment portfolio or want to find out more about how we can look after and grow your wealth, please don’t hesitate to get in touch. Email us at enquiries@bowmorefp.com or call01275 462469.

 

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

The tax treatment of certain products depends on the individual circumstances of each client and may be subject to change in future

Bowmore Financial Planning Ltd is not regulated to provide tax advice. A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

Bowmore Financial Planning Ltd is authorised and regulated by the FCA.