Bowmore Bulletin: Your latest update from the Bowmore team

hands all together in a fist-bump

This month, there is much to report from Bowmore HQ!

Read about this month’s press coverage; how para-administrator James Rickard has taken one step closer to becoming a fully-fledged paraplanner; plus, catch up with Duncan and Mark, who are now two months into their cycling training.

Bowmore in the press

Bowmore’s research, which found an increase in the number of young people becoming millionaires in recent years, was published by International Adviser, IFA Magazine and Money Marketing in February 2022.

Our research revealed that the number of millennial and Generation Z millionaires doubled to 2,000 in the 2018/19 tax year, compared to 1,000 the year before.

According to our chief executive, Mark Incledon, this change could, in part, have come from inspiring stories of young people who have found huge success in starting their own businesses.

Speaking to Money Marketing in February 2022, Mark said: “Millennials have continued to be attracted towards starting up their own businesses. This is partly because of high-profile success stories from their generation.”

Meanwhile, International Adviser also quoted Mark: “Millennials are earning more than ever before. They should be putting away as much as they possibly can now to avoid the stress of having to catch up on their retirement savings later down the line.

“During lockdown we’ve seen that more millennials are considering their financial future and putting money to work by investing.”

In addition, as inflation continues to weaken cash savings, client director, Charles Incledon, spoke to IFA Magazine about the recent performance of Cash ISAs compared to Stocks and Shares ISAs in light of rising inflation.

Charles says, “While there may be some stock market jitters at the moment, over the longer-term equities have proven to dramatically outperform cash.

“Regardless of whether you are investing for your grandchildren, children or indeed yourself, at the very least you want to ensure the value of your pot today increases sufficiently to ensure it retains its purchasing power as prices gradually increase.”

Visit IFA Magazine to read the full story.

James Rickard gets one step closer to becoming a fully-fledged paraplanner

James Rickard has passed one of the key exams involved in becoming a paraplanner, taking him one step closer to achieving his diploma.

We caught up with James about the exam he took and what his next steps might be when it comes to completing the quest to qualification.

Tell us about the role you hold at Bowmore.

Currently, I am a para-administrator, which is an administrative position with a path to paraplanning over time, in line with increasing qualifications and experience. I work with the Bowmore team to improve my knowledge and experience in the sector while simultaneously completing my exams.

Which exam have you passed?

The exam is called R05 Financial Protection. It’s one of the six exams required to achieve the CII Level 4 Diploma in Regulated Financial Planning.

Did you have to pass other exams to reach this one?

Of the six R0 exams, I have now passed three.

There’s no set order in which to take them, but passing this test takes me halfway to completing my diploma, which will allow me to practise as a regulated financial planner.

How are you at exams, generally?

I am, thankfully, good at exams. I finished university in 2020 and sat my first R0 financial planning exam in February 2021, so it’s safe to say I’m not out of practice!

What was the hardest part of preparing for the exam and how did you revise?

The sheer volume of content for the R0 exams is generally the hardest element. A good understanding of the core concepts of each can help to infer answers when you’re unsure of the specifics.

I revised the topics by interspersing studying the unit material with past papers to track my progress and detect gaps in my knowledge. It’s a technique I’ve used for a while and it seems to work well!

I took the exam itself online under remote invigilation.

What will passing the R05 Financial Protection exam mean for you professionally?

Passing this unit moves me one step closer to my diploma, which will enable me to practise as a financial planner eventually.

In the short term, passing each unit displays an understanding of each subject, allowing me to take on more day-to-day technical work in the corresponding areas of the advice process.

The next exam I will take is the R04 Pensions and Retirement Planning. I’m looking to take this around the Easter break, so I’m going to begin studying very soon for that one!

Mark and Duncan continue to train for Children’s Hospice South West’s Ride for Precious Lives

Last month, you read about Mark and Duncan and their decision to join the Ride for Precious Lives 2022, a charity bike ride in aid of Children’s Hospice South West (CHSW).

The 215-mile sponsored cycle ride, beginning in Bristol and finishing in Cornwall, will support CHSW in their incredible work providing care for children suffering from terminal illnesses and their families.

Mark and Duncan have been training for this epic 215-miler for a number of weeks now, so we checked in with them to see how training’s getting on…

Training update from Mark Millet

Are you looking forward to spring training, Mark?

After a difficult February, where we’ve all had some illness and bad weather has taken hold, it was good to get back on the bike. Now that March has arrived, hopefully, we’ll have some better weather and lighter evenings.

Are you still receiving great support from your friends and colleagues?

There has been fantastic support from people toward our sponsorship, despite all the other worthy causes, not least Ukraine. Many thanks to our supporters so far.

Our JustGiving page is reflecting great numbers already and we welcome any further donations from those who want to support CHSW.

Have you changed anything about your training regime since we last checked in?

Since starting my training journey, I’ve taken some specialist biking advice.

I have recently been for my “bike fit”, which involves an assessment as to how I ride my bike. Then, the physiotherapist, Brian, made small adjustments to the settings on my shoes, seat, handlebars and other components, all of which aimed to make me more effective and comfortable on the bike.

This was a great experience and has made a huge difference. Just look at the before and after photos!













In my first ride since having the new set-up, I can already see how the adjustments have reduced my backache and improved my overall comfort.

How far are you cycling on a regular basis?

This weekend, I managed another 30-miler with fellow riders Steve Calder and Mark Paxford, whose late daughters’ memories inspired me to take this challenge. We braved the -1 wind chill on Sunday! Here’s to sunnier days and having the wind behind us!

I hear Duncan is cycling at least five times a week, so I’m excited to see if I can keep up with him!

Sponsor Mark and Duncan on the Ride for Precious Lives

If you have been inspired by Mark and Duncan’s epic training efforts for the Ride for Precious Lives, you can sponsor them on their JustGiving page by clicking the image below or by scanning the QR code with your phone.







Why playing Wordle (and other brain-taxing puzzles) every day is good for your health

person playing Wordle on their phone

Wordle, the simple-yet-addictive new online word game, is taking the world by storm. The concept is easy to understand: guess the mystery five-letter word in up to six tries, and boast about your results to your friends, family, colleagues and social media followers.

According to the Guardian, having had only 90 daily players in November 2021, Wordle is now up to 3 million players a day as of March 2022. The game was acquired by the New York Times in January.

The story behind Wordle is not one of financial pursuit but of love. According to Upworthy, Josh Wardle, the game’s creator, made Wordle for his partner, Palak, because she loved to play word games on her phone during lockdown.

Wordle can certainly be addictive – but beyond daily enjoyment with the occasional bout of frustration, could Wordle actually affect the way your brain works? Studies have shown that word games could provide you with much more than competitive wordplay among friends.

Read on to find out how brain-taxing puzzles like Wordle might help sharpen your cognitive function.

Word games can be like weightlifting for your brain

Exercising your body is crucial – everybody knows that.

Making sure your muscles are strong and stretched is important for your long-term health, your mood, your sleep and your concentration.

Just like your body, your brain needs regular exercise to remain at its healthiest.

Research conducted by psychologist Rebecca Marcus, published by Healthline, claims that word games and puzzles can be like weightlifting for your mind – you can engage your brain in challenging puzzles to improve its “muscularity” and “fitness”.

By improving your “mental fitness”, you could find yourself with improved concentration, and even be able to cope better with difficult situations that arise in your work and social lives.

Challenging your mind with word games can enhance your mood

Since the Covid-19 pandemic began in March 2020, studies have shown that overall, the UK’s mental health was affected significantly by its arrival.

A study published by the Mental Health Foundation shows that up to 49% of people felt regularly anxious over a two-week study period during the pandemic, while 19% experienced feelings of hopelessness.

Of course, Wordle isn’t a quick fix for difficult periods of low mood, brought on by circumstances beyond your control. However, research shows that puzzle games like Wordle could boost your mood.

Not only is challenging your brain good for feelings of satisfaction, fun and concentration, but in the case of Wordle, sharing your results of this one-word-a-day game with friends and family can keep you socially engaged.

According to neuroscientist Renetta Weaver, in research published by Very Well Mind, “Wordle presents a challenge that our brain is motivated to solve. When we aren’t able to solve the challenge, we are given the answer, and that a-ha moment brings calm to our stressed brain.”

In a time of international difficulty like the Covid-19 pandemic, a seemingly trivial word game could actually help soothe your brain and boost your mood and could help you feel more sociable too.

For older players, Wordle and other online puzzles can improve cognitive function

In 2019, research conducted by the International Journal of Geriatric Psychiatry, published by PubMed, confirmed that “the frequency of word puzzle use is directly related to cognitive function in adults aged 50 and over”.

Indeed, it has long been documented by psychiatrists and other medical professionals that word games like Wordle aren’t just fun but are in fact helpful for maintaining proper cognitive function, particularly in older people.

By challenging your brain to find patterns within puzzles or word games, you could be helping your brain to stay at peak function for longer.

If you are approaching retirement age, you could be concerned about keeping your brain sharp as you age – and according to these scientists, Wordle and other word games could help you achieve that goal.

Wordle can provide a few minutes of relief from other daily stressors

One of the things that make Wordle unique is the fact that it doesn’t ask you for more. A player has six tries to guess one word, and after that, they must wait until tomorrow to have another go.

This mode of gameplay is unusual in 2022, with most game apps constantly trying to find ways to hook you into playing more – ultimately creating more stress in those who feel they are becoming distracted from important tasks and social interaction by these games.

When it comes to Wordle, you could find the few minutes you spend playing the game become a much-needed respite at the start, middle or end of your day. You can enjoy a moment of brain-taxing fun all to yourself, without becoming hooked on a game that will distract you from your obligations.

If you love playing Wordle, you could find that over time this game improves your vocabulary, concentration, memory, and even your mood.

Have you got the right protection in place to protect your finances now and in the future?

Family in protective sunny spot in field

In recent years, people around the world have had their lives altered by events beyond their control.

The Covid-19 pandemic arrived unexpectedly, sadly causing the deaths of more than 100,000 British people. You might have had to consider what might happen if you were to lose a family member, or if you passed away yourself.

Even aside from the pandemic, now is the time to consider investing in financial protection. According to research published in 2021, only 26% of UK adults have life insurance – and 12% have no insurance at all.

Read on to find out three types of risk you and your family could encounter, and some financial protection options that could be life-changing – plus, why working with a planner can help you ensure your assets are protected.

3 types of risk you and your loved ones might face, and how financial protection could help

  1. You could pass away unexpectedly

It can be difficult to consider these things, but have you ever paused to think about how your family would be able to maintain their current lifestyle if you were to pass away in the near future?

The Covid-19 pandemic taught us that even healthy young people can pass away from unexpected illnesses or accidents.

With a life insurance policy in place, your family could receive a payout in the event of your death, that could help them to:

  • Continue paying the mortgage on your home, meaning they may not have to uproot their lives if you passed away
  • Cushion the hit of an Inheritance Tax bill
  • Cover living costs such as school fees, travel and day-to-day expenditure.

Despite the amazing benefits life insurance can bring, according to a 2021 study by FTAdviser, many Brits reject life cover because of two key myths: it’s “too expensive” and “unreliable”.

However, according to Unbiased, the average monthly cost of life insurance in the UK is between £15 and £30, depending on the type of cover you choose and your individual circumstances, such as your age, health status, income and asset value.

This data points to one simple conclusion: life insurance can be highly affordable and reliable.

Your planner might recommend life insurance to you, as it could act as a significant element of protection that may shore up your family against financial difficulty in the event of your death.

Speak to your financial planner if you would like to learn more about how to minimise risk by looking into protection options.

  1. You become critically ill

According to UK insurer Aviva, more than 3 million people aged between 35 and 49 have a health condition that may last more than a year.

Furthermore, the same study revealed that more than 100,000 people in the UK aged between 35 and 60 were diagnosed with cancer within a one-year period. If you were one of those 100,000, could you keep supporting your family, even if you couldn’t work for a number of months or years?

Despite the increasing prevalence of serious illnesses, only 7% of Brits have critical illness cover.

Critical illness cover helps to provide a lump sum for those diagnosed with serious illnesses or disabilities that prevent them from working, such as cancer or a stroke.

A one-time tax-free payment is made to you if you successfully make a claim, which can be used to supplement your income during your period of illness.

As of March 2021, Statutory Sick Pay (SSP) stands at £96.35 a week. Even if you have a health insurance plan through your employer, this might be limited to a number of weeks or months and could run dry in the event of a long-term illness.

Critical illness cover could provide the support you need, so you can keep your personal finances protected even in the event of a life-changing diagnosis.

  1. An injury or illness could stop you from working altogether

Most people work to sustain their income, providing for themselves and their family in the process. Your home, belongings and experiences, such as travel, all rely on you having an income that can give you the lifestyle you want.

If you became injured, were diagnosed with a disability or experienced another life-altering event that stopped you from working, could you continue to provide yourself and your loved ones with the lifestyle you love?

Even if you could stand to lose a few luxuries in your life, foundational assets, such as your home, could be at risk if you don’t have a financial cushion in place for circumstances like these.

Monthly mortgage repayments are the biggest household expenditure in the UK, according to Compare the Market, accounting for approximately 18% of combined household income or 24% for London homeowners.

If an illness or injury stopped you from being able to work, could you keep up your mortgage repayments for a long period of time?

Even if your savings could cover your mortgage for a while, income protection insurance could prevent you from depleting your hard-earned savings.

This type of cover could provide you with a steady income while you are unable to work, allowing you to continue supporting yourself and others without adding stress to your situation.

If the unexpected were to occur, this type of cover could be the difference between having to sell your home and having your assets protected.

Working with a planner can help you find the right protection

The good news is, there have never been more financial protection options available. You can choose from a wide range of choices that could bring you valuable peace of mind in these trying times.

However, a wide array of choices means it could be difficult to assess what kind of protection you need. Your financial planner can provide professional insight into the kind of cover that might be right for your family, your age and your portfolio of assets.

Get in touch

If you have questions about financial protection and want to learn about the options available, reach out today. Email 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.

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

Why longevity matters when planning for your retirement

Older people dancing

Retirement is traditionally seen as a time to relax and enjoy the rewards of your hard work. You may already have an idea about the kind of things you want to do, from mastering your hobbies to spending more time with loved ones.

In recent years, life expectancy has increased significantly due to advances in healthcare and improvements in our lifestyles. According to data from the Office for National Statistics (ONS), the average man in the UK can expect to live until 79, while the average woman lives to be around 83.

This means that you’ll probably be able to enjoy a much longer retirement than previous generations. Of course, this may also mean you’ll need a greater amount of wealth to support your desired lifestyle for longer.

When it comes to building a long-term plan, longevity is one of the most important factors that you’ll have to consider. Read on to find out how it could affect you.

People are living longer due to advancements in healthcare and technology

According to the ONS’ life expectancy calculator, the average 55-year-old man typically lives until age 84, while a woman may reasonably expect to reach the age of 87. This means that if you retire as soon as you are able to, your pension wealth may need to last you for 30 years or more.

Of course, it’s important to remember that these are just the average figures. According to the calculator, a 55-year-old man has a 10% chance of reaching 97, while a woman has the same chance of reaching 99.

One of the main reasons we are living longer is because there have been substantial improvements in healthcare in recent years. Many illnesses, which would have been fatal only a few decades ago, are now survivable and this is helping more people to live longer.

In the same vein, healthcare professionals have been much more vocal about making lifestyle changes that can improve people’s health and wellbeing. For example, there is now much greater awareness of the dangers of smoking.

Furthermore, improvements in technology allow pharmaceutical companies to adapt much more quickly to potential problems, which can help to save lives. The rapid development of a Covid-19 vaccine by AstraZeneca in 2020 is a good example of this.

It’s important to factor in the impact of inflation on your wealth

There are many advantages to living a longer life, as having more time gives you more opportunities to see your loved ones, travel the world and master your hobbies. Of course, it can also present some issues.

One of the biggest issues is that you may need a greater amount of wealth to support you throughout retirement. This may mean that you have to invest more into your pension or reassess your investing strategy to achieve stronger returns.

You’ll also need to bear in mind how inflation will affect your wealth over time. Since it essentially eats away at the real value of your money, it’s important to factor this in when planning for retirement.

According to the Times, at the current rate of inflation, with the Consumer Price Index at 5.5%, it would take just 13.1 years for your wealth to lose half its buying power.

If you want to avoid this prospect, it’s important to have an effective investment strategy that suits your needs. This is where working with a planner can help you, enabling you to grow your wealth to counteract inflation without exposing yourself to unnecessary risks.

A longer life may mean you need to plan for greater care costs

Another issue of a longer life that you may need to consider is the impact of care costs. No matter how well you look after your physical wellbeing, as you get older you may find that you need more help and may require long-term care.

Depending on what type of support you need and how long you need it for, you may have to put aside a significant amount of money.

According to data from the non-profit organisation Paying for Care, the average cost of staying at a residential care home in 2020 was £34,994 a year. However, this rose to £48,720 for people who needed nursing care too.

If you don’t factor this in when planning your retirement, it could affect the financial wellbeing of your loved ones. Without some money put aside to pay for the costs of care, you may end up leaving them a smaller inheritance than you had desired.

Working with a planner can help you plan for a longer life

While nobody can say with any certainty how long they will live for, if you want to enjoy a longer retirement, then it’s important to make a thorough plan. This is where seeking professional financial advice can help.

When you work with a planner, they can help you to build your wealth more effectively, so you don’t have to worry about the risk of running out of money in retirement.

For example, they can help you to save for the future in the most tax-efficient way or assess whether your current investment strategy will give you enough for the lifestyle you want. This can give you much greater confidence that you won’t run into any unexpected issues.

If you want to plan for a longer life, seeking professional advice can help to give you greater peace of mind that you’ll have enough wealth to support you throughout your lifetime.

Get in touch

If you want to ensure you’ll be able to enjoy a comfortable and sustainable lifestyle in retirement, we can help. Email or call us on 01275 462 469.

Please note:

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.

The value of your investments (and any income from them) 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. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Want to beat inflation? Here are 7 practical tips for pensioners

Mature couple checking bank documents at home and doing their accounts on a laptop at the dining table.

Spring is in the air and many of us are looking forward to longer days. But, as the winter chill lifts, many pensioners will be feeling the squeeze from the rising costs of living.

Inflation is already at the highest level since 1992, having reached 5.5% last month, thanks to the fallout from Covid-19. The Bank of England (BoE) have forecast that inflation could reach more than 7% in April.

This means that the increase to the State Pension, also due in April, is unlikely to keep pace with inflation.

To make matters worse, the current price cap on variable energy is due to end in April.

Experts were warning us about rising energy prices even before Russia invaded Ukraine, so we should all expect energy costs to jump dramatically in April too.

Read on to find out what you can expect from the State Pension and get seven practical tips for how you can protect your wealth and income if the cost of living is starting to pinch.

The triple lock suspension

The triple lock applies to the State Pension and was put in place to ensure pension payments keep pace with living costs.

Usually, the triple lock would help ensure that the State Pension would rise in line with the highest of these three measurements:

  • 2.5%
  • Average earnings growth year-on-year for the May to July period
  • Inflation (using the Consumer Price Index measure) in the year to September.

This year, because the pandemic caused an artificial boost in wages, the triple lock could have prompted an 8% rise in the State Pension in 2022. So, in September 2021, the government suspended the triple lock and announced that the State Pension would increase by just 3.1% in April 2022.

This means that in April 2022:

  • Basic State Pension will increase from £137.60 to £141.85 a week
  • Full State Pension will increase from £179.60 to £185.15 a week.

In normal times, these pension increases wouldn’t seem too bad, but with the spiralling costs of inflation, for many pensioners, life could get difficult.

7 practical ways pensioners can beat inflation

If you’re nearing retirement or you rely on the State Pension for your income, there are a few things you can consider to help improve your financial situation.

1. Protect your savings

In times of high inflation, your cash will lose value in real-terms since interest rates cannot compete with the rising costs of living. Although it’s sensible to keep an emergency fund in an easy access account, you might want to consider investing any additional cash in stocks and shares.

Ideally, your emergency fund should have enough cash to cover between three and six months of your normal expenditure.

Wise investing can give your money the opportunity to beat inflation and grow in value. While investing in the stock market comes with some risk, history shows that, over the long term, equity investments tend to outperform cash and produce an above-inflation return.

To illustrate the power of investing in the stock market, the chart below illustrates how £100 invested in cash compared to the FTSE All-Share index.







Source: Refinitiv Datastream (total return assumes that all earnings and dividends are reinvested)

2. Find a “safe haven” for your cash

Some people turn to safe havens to protect their money in times of inflation.

Safe havens are assets you would expect to remain popular over the decades because supply is limited. For example, you might consider things like classic cars, works of art or commodities such as gold.

While gold can prove to be a useful safe haven, there are downsides. For example, the price of gold can stay virtually static for long periods of time – sometimes decades – without generating any returns.

Although safe havens, like gold, can serve a useful purpose for some investors, your money can probably work harder invested elsewhere.

3. Review your budget

If you haven’t taken the time to review your incomings and outgoings recently, now is a good time to revisit your household budget. Make sure you know exactly where your money is going every month.

In doing this, you may find that you can trim some costs. Perhaps you’re still paying for things you no longer need? So, study your bank and credit card statements with care and be ruthless in reviewing your bills and direct debits.

This is the perfect time for a financial declutter, so cancel anything that no longer provides true value.

4. Shop around for better deals

Spend some time making sure you’re getting the best deal. You may find that you can make substantial savings by swapping your phone company or reviewing your home or car insurance.

5. Find out whether you’re eligible for pension credit

If things are tight, check if you’re eligible for pension credit. You can claim pension credit even if you have other income, savings or own your home.

6. Consolidate any credit card debts

If you have credit card debt that you’re struggling to repay, it might be a good time to consolidate it. Shop around to see if there’s a suitable 0% credit card transfer deal that allows you to transfer all your debt to one new card and save on interest payments for a period.

Sometimes you can find deals that mean you pay 0% interest for up to two years or more.

If you decide to consolidate, make sure you do the sums to ensure you’ll actually end up paying less once you’ve taken into account all the applicable fees and charges.

7. Talk to a financial planner

For the best chance of protecting your wealth and finances against inflation, talk to a financial planner. They will have a deep understanding of the problems you face and the different ways that might be appropriate for you to help mitigate the issues.

Get in touch

If you’re concerned about rising costs and the effects of inflation and want help to protect your income and wealth, get in touch. Email or call us on 01275 462 469.

The value of your investments (and any income from them) 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. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

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.

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

Why has the government considered scrapping the top rate of tax in recent months?

A man working something out on a calculator.

The government has spent a considerable amount of money in its fight against the coronavirus pandemic. From the furlough scheme to the cost of buying PPE and developing the Track and Trace system, the Treasury has had to shoulder a significant burden.

According to figures from the BBC, the government had to borrow more than £321 billion to cover the cost of these measures in the 2020/21 tax year. With this in mind, it might be surprising to hear that there have been proposals for significant tax cuts in the near future.

One unusual suggestion is to abolish the highest level of tax, as some economic theorists suggest this might be a useful way to boost both the economy and the Treasury’s coffers. Read on to find out why and what it would mean for you.

Cutting taxes may boost consumer spending, stimulating more economic growth

The cost of the government’s pandemic measures has far outstripped the Treasury’s ability to pay for them. Due to this, they have been forced to borrow large amounts to cover these expenses.

Of course, while this can be useful for meeting their short-term obligations, it isn’t a sustainable solution. For a start, the significant interest that the Treasury pays on these loans will pose an additional problem down the line.

Therefore, the government may have to think outside the box for new ways to stimulate the economy and in doing so raise their tax revenue. To accomplish this, cutting taxes might help.

The most obvious benefit of doing this would be that people have more money to spend. This rise in consumer spending could help companies to grow and hire more staff, increasing employment and generating even more economic activity.

As the economy becomes healthier, businesses see higher profits and workers enjoy better wages. This means that, in the long term, the government receives more tax revenue.

Of course, the economy is rarely as simple in practice as it is in theory, but this is the basic logic behind cutting taxes to stimulate growth.

However, there is also another reason why this can lead to more income for the Treasury and it explains why the government plans to cut the top rate of tax.

Supply-side economists argue that slashing taxes can actually boost government revenue

While it enables the government to provide important services, nobody likes having to pay tax. This is why one of the problems with raising rates is that it reduces people’s incentive to work, which can often lead to a fall in tax revenue.

This is the basis of the “supply-side economics” school of thought. One of its most famous proponents, the economist Arthur Laffer, argued that the relationship between tax rates and actual government revenue isn’t linear but rather curvilinear, as you can see on the simplified graph below.

Source: Investopedia

As you can see, when the tax rate is 0%, the government receives no income. Conversely, when it’s set at 100%, there is no incentive for people to work and so there will still be no revenue.

This economic theory argues that past a certain point (represented by the T* on the graph), increasing taxes is self-defeating, as doing so actually reduces people’s incentive to work.

This is why there have been suggestions that removing the additional rate could provide a major economic boost for the country. Not only would high-earners be able to spend more of their hard-earned money but cutting tax rates can also provide an incentive for greater economic production and activity.

If they did scrap the top rate of tax, the government may raise money through other means

If you earn more than £150,000 a year and the government chose to scrap the top rate of tax, the most obvious consequence would be that your tax bill would fall. However, while this may sound like good news, it’s important to remember that the move may affect you in other ways.

Even though the proposal would increase government revenue over time, in the short term it could lead to a large fall. Since further borrowing could be highly unpopular at a time when people are already being squeezed by the rising cost of living, they may have to raise money in other ways.

For example, the government may freeze more of their tax allowances. This would mean that as wages rise, the Treasury would see an increase in their revenue due to fiscal drag. As a result, even though you might save money on your Income Tax bill, your wealth would still be eroded in other ways.

If you want to avoid this happening, it’s important to be able to make informed decisions, which is where seeking professional advice can help.

Working with a planner can enable you to manage your wealth in a more effective way, allowing you to minimise the impact of any potential allowance freezes. This can help you to feel more confident that you’ll be able to meet your long-term financial goals.

Get in touch

If you’re concerned about the prospect of future allowance freezes eating into your wealth, we can help. Email 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. All contents are based on our understanding of HMRC legislation, which is subject to change.

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

What should I do with my stock options?

A stock market trading graph

In the tech sector, many small and growing companies offer shares as part of their benefits package. This can potentially be very lucrative, as they may significantly rise in value as the business grows and increases its profitability.

If you’re lucky enough to work for a company that offers you shares and stock options, you might be wondering what to do with them.

Thankfully, it often isn’t as complicated as it may seem, so read on to find out what you should do with your shares and stock options.

Shares and stock options are some of the most common benefits you may receive

Typically, there are three common types of benefits that your company may offer as part of your compensation package. These are common shares, growth shares and stock options. Each have their own advantages, so it’s important to be able to understand how they work.

Ordinary shares

Sometimes called “common shares”, these assets essentially give you a part ownership of the company. Unlike growth shares, anyone can own these, including private investors.

Owning shares can sometimes entitle you to dividend payments or being able to vote on major company decisions.

Growth shares

Growth shares are similar to ordinary shares but work slightly differently. For a start, unlike common shares, they typically don’t entitle you to any dividends or the right to vote on company decisions. Furthermore, they are usually only issued to employees.

Often, your company will issue growth shares at a slightly inflated value known as the “hurdle price”, which reflects the hope that the business will grow. This means you can only sell your shares when the value has increased past this point.

For example, let’s say you joined your company when its shares were worth 100p each. As part of your compensation package, they issue you growth shares with a price hurdle of 120p. This means you can’t profit from selling these assets until the value of your company’s shares have increased by at least 20%.

Stock options

Another important benefit that you may receive as part of your compensation package are stock options. Essentially, this gives you the right to buy a set number of shares in the company at a future date for a pre-set price.

This can be a very valuable benefit if your company grows faster than expected, as it may mean you can buy stocks at a significant discount. However, you may only have a limited time to take advantage of this offer and could lose the opportunity if you leave the company.

It’s also important to note that, even if you have options to buy at a future date, they are not real shares until you have bought them. This means that you won’t yet see the benefits of being a shareholder, such as getting dividend payments or voting rights.

There may be tax considerations to think about when you take shares and stock options

Shares and stock options can be a useful way to grow your portfolio and you can potentially make a large amount of profit from them. Of course, before you can, it’s important to understand the tax liabilities you could run into.

Typically, if your company offers you shares, you may be able to get valuable tax advantages, such as not having to pay Income Tax or National Insurance on their value. However, this is only the case if you receive them through one of the following schemes:

  • Share Incentive Plans (SIP)
  • Save As You Earn (SAYE)
  • Company Share Option Plans
  • Enterprise Management Incentives (EMIs)

It’s also important to bear in mind that, when you come to sell your shares, you may need to factor in the effect of taxes. However, while both Income Tax and Capital Gains Tax could eat into your profits, there may be ways to mitigate these taxes.

For example, if you received your shares through either a SAYE scheme or a SIP, you may be able to transfer up to £20,000 of them into an Individual Savings Account (ISA).

While you typically have to make such a transfer within 90 days of claiming your shares, this can have valuable benefits, as ISAs are a tax-efficient way to build your wealth. This means that you won’t have to pay any Capital Gains Tax on the growth of the value of your shares and any value you take later will be paid free of Income Tax. These shares will count towards your £20,000 ISA limit.

Of course, when it comes to navigating tax laws, there can be many potential pitfalls that you could run into. This is where seeking professional advice can help you.

Working with an expert can help you to manage your wealth more effectively

When you work with a financial planner, they can help you to make informed decisions about your wealth. This can help you to grow it more effectively and reduce your tax liabilities.

Furthermore, if your company shares grow significantly in value over time, then they may make up a large portion of your portfolio. If this is the case, a planner can help you to regularly rebalance it, so you aren’t overly exposed to the risk of a market downturn.

Working with a professional can help to give you more confidence that you’re managing your wealth as effectively as possible to meet your long-term goals.

Get in touch

If your company offers you shares and stock options and you want to know how to make the most of them, we can help. Email 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.

Share values and income generated by the investments could go down as well as up and you may get back less than you originally invested. These investments are highly illiquid, which means investors could find it difficult to, or be unable to, realise their shares at a value that’s close to the value of the underlying assets.

Tax levels and reliefs could change and the availability of tax reliefs will depend on individual circumstances.

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

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

More than 100 listed UK companies sound alarm as Ukraine war makes investors move away from shares to gold

Jonathan Webster-Smith, Chief Investment Officer quoted in City AM 21st March 2022

“While the conflict has caused a significant sell-off in the stock market, we believe investors with a long-term horizon should not panic at the volatility that we are seeing within global markets, which are dislocated from fundamentals at this time.”

“Investing for the long-term means trying to look beyond the headlines and predict how the crisis will impact data and corporate results and trends over the coming year.”

Read more:

More Than 100 U.K. Listed Companies Warn on Ukraine War Impact

Bowmore Asset Management research, quoted on Bloomberg, 20th March 2022

115 UK listed companies have now warned of the effects of the war in Ukraine in their stock exchange announcements, shows research by Bowmore Asset Management.

The number of companies warning of the risk the situation in Ukraine poses has risen almost fivefold in the past week, up from 20 the week before.

So far few have quantified the impact on their earnings, but companies which have warned of a direct impact on their operations include several FTSE 100 firms such as BP, Shell, JD Sports, British American Tobacco and Imperial Brands.

Of the 98 companies, over half (59) have warned of a negative impact specific to their operations in the region, while 47 have warned of heightened macroeconomic risk generally as a result of the situation.

Read more:

Thematic Investing: Introducing Cybersecurity

In an increasingly digital world, the threat of cybercrime has become impossible to ignore. The world has digitised – from personal banking to entire businesses functioning solely online – and in recent years cybercrime has become ever more sophisticated and wide-ranging. The World Economic Forum ranked cybersecurity failure as the fourth highest critical threat to the world.

What is the potential growth for Cybersecurity?

Source: First Trust, Identity Theft Resource Center, Cyberscout and Statista 2021

The growth of cybercrime activity and cybersecurity investment has boomed in recent times but in a post-COVID world where more and more services have become digitised, cybersecurity has become a business priority and as such is expected to grow and become increasingly profitable.

In the U.S. the cybersecurity market was valued at $156.5bn in 2019, with more than half of the market focused on services rather than software or hardware. In 2027, the market is forecasted to be worth over $326bn, representing a compound annual growth rate (CAGR) of c.10%.

Information versus fake news

In a world where information is power, digital borders need defending as fiercely as physical partitions. This can be demonstrated by Russia’s interference in the 2016 US presidential election via social media and more recently with the Ukraine invasion.

Western countries have made protecting information and shielding citizens from malicious influences their national priorities. We feel that recent geo-political tensions are likely to provide an additional boost to the industry at government and business levels, thus boosting investor returns.

What are the long-term drivers for cybersecurity?

Key drivers for the growth of cybersecurity include: innovation, urbanisation and regulation.

Technological innovation has created new security needs. For example, much effort is being made towards transitioning to autonomous cars. This sector would simply not be viable without stringent security measures in place.

Substantial investment is required to urbanise and secure infrastructure such as power plants, airports, etc. More than half the world’s population now lives in urban areas and that proportion continues to rise.

New regulation around the security of their data is imposed on public and private companies with increasing regularity. The introduction of the EU’s Global Data Protection Regulation (GDPR) in 2018 has further fuelled demand for cybersecurity and cyber-awareness across the industry.

Bowmore Portfolio

Amid the Technology sell off during the months of January and February, we felt it was an appropriate time to gain exposure to the cybersecurity theme, a sub-sector of technology. We took the opportunity to introduce the First Trust Nasdaq Cybersecurity ETF across all portfolios within the Global Themes sector. We believe this is an efficient and cost-effective way to expose ourselves to a growth sector that can continue to increase its revenues over the coming years.

In other news

Yesterday, the Bank of England mirrored the Federal Reserve (Fed) and raised interest rates by 0.25% to 0.75%, as was widely expected. However, unlike the Fed there was a distinctly dovish tone to the hike. Most notably, a board member of the Bank of England argued that he would have felt it prudent to wait and see how the increase of commodity prices would affect the UK economy and inflation before raising rates.