Financial supplement 2013

Personal Finance & Wealth Management Supplement

the barrister

Supplement 2013

UK wealth in Liechtenstein:Privacy in a world of transparency

As an independent, family owned, wealth management group with roots dating back to 1931, we offer trust and bank services tailored to the specific needs of

those living or investing in the UK. We have dedicated ourselves to tax compliant solutions and are able to offer you exclusive access to an extensive network of trusted partners to safeguard your wealth. As one of the architects of the

Liechtenstein Disclosure Facility (LDF), we can help those seeking to regularize their UK tax position. Please contact us to learn more.

T +423 236 54 44, F +423 237 80 [email protected]

www.kaiserpartner.com

Kaiser Partner is an award-winning, family-owned wealth management group and private bank that combines tradition with a modern, forward-looking business model. Our roots are strong and stretch back to 1931. With a head office in Vaduz, Principality of Liechtenstein, and offices in Zollikon, Switzerland, we bring together a leading trustee firm, a private bank specializing in asset management, an investment advisor registered with the SEC, the US stock market regulator, and a family office for clients looking for holistic services that put their family interests at the forefront.

Our multifaceted expertise lets us provide comprehensive, knowledgeable advice and support to private individuals and families on all issues relating to their wealth. We develop tailor-made strategies and solutions to help clients protect and grow their wealth in a rapidly changing world and to deal with asset protection and succession issues in a way that puts the interests of the family at the center. We are supported in our endeavours by an ever-expanding international network of experts in a wide variety of disciplines.

Our guiding principle – how we see our mission

We help our clients protect, manage and grow their wealth so that ultimately this wealth can deliver the greatest possible benefits – for our clients themselves, for their families and for the communities in which they live and invest.

Our strategy – how we fulfil our mission

Everything on our planet is interlinked, connected with everything else and in constant motion. We try to recognize, foresee and understand changes, and by applying our expertise we aim to use the power of change to grow wealth.

Our approach – how we achieve our objectives

We try to understand the big pictureWe are a knowledge-based company and we invest time in understanding not only our clients’ worlds, but the world as a whole. We discuss what we have learned and evaluate what it all means. We always make an effort to make our decisions based on the bigger picture.

We put innovation at the centreAs a company we want to and must keep developing – permanently. To manage wealth successfully we need to adapt and realign the tools we use to reflect the march of time and the way circumstances change. We take the long view and remember to heed the old lessons even when situations might require us to take new and as yet uncharted routes.

We take responsibility and expect others to do so tooWe know that “responsibility” is crucial and non-negotiable for ourselves and for each individual client relationship. We take responsibility for everything we do. And we expect our clients to act responsibly too. For us responsibility and sustainability are inextricably linked.

We think and act independentlyOur insights and convictions influence our ideas and guide our actions. We act confidently and in good faith, and our approach helps us understand the times we live in and do the right thing.

A short overview• Founded in 1931• Wealth management group with private bank and trust affiliates• Investment advisor in Switzerland with SEC registration• 200 employees from 20 countries, speaking 10 different languages• Private clients in 20 countries• Worldwide, multidisciplinary network of experts• Head office in Liechtenstein• Offices in Vaduz (Liechtenstein) and Zollikon-Zurich (Switzerland)• CHF 25 billion of assets under administration

Kaiser Partner at a Glance

Kaiser Partner Trust Services AnstaltPräsidial-AnstaltCorTrust reg.Pflugstrasse 109490 Vaduz, LiechtensteinT: +423 236 58 00F: +423 236 58 01www.kaiserpartner.com

Kaiser Partner Privatbank AGHerrengasse 239490 Vaduz, LiechtensteinT: +423 237 80 00F: +423 237 80 01www.kaiserpartner.com

Kaiser Partner Financial Advisors Ltd.Zollikerstrasse 608702 Zollikon-Zurich, SwitzerlandT: +41 44 752 51 11F: +41 44 752 51 35www.financial-advisors.ch

property keeps performingWith national house prices predicted to rise by 5.5% in 2013 and 28.7% over the next five years*, residential property is now one of the most highly prized and sought-after investments.

Chesterton Humberts is one of the UK’s largest estate agencies and property consultancies and offers a full range of services to help investors identify, acquire and manage their investments:

SALESOur experienced staff have an in-depth knowledge of their local area which enables them to accurately value and market their clients’ properties and help buyers find their ideal home.

LETTINGRecently named ‘Large Letting Agency of the Year’ by the Sunday Times, we have one of the strongest lettings teams in the country, and are renowned for our excellent customer service.

MANAGEMENTWe offer our landlords a hassle-free management service which optimises return and minimises fuss for their rental investments.

FINANCEThrough our recommended mortgage broker, Springtide Capital, our clients can secure some of the best mortgage rates on the market and access special deals that are not available from high street providers.

PROFESSIONAL SERVICES

Our professional services team advises clients on real estate issues that arise from valuation, dispute resolution, rent review and construction.

LEASEHOLD ENFRANCHISEMENT

With specialist expertise in the leasehold reform field, supported by our local offices, we can help leaseholders take a proactive step to protect and enhance the value of their property, providing sensible, realistic and cost effective advice to arrive at the right price or premium. We also act on behalf of some of the largest freeholders, using our local knowledge and expertise to secure the highest premiums.

BLOCK MANAGEMENT

Our Block Management team provides management solutions to freeholders, management companies, RTM’s and developers. Our reputation is built on strong relationships.

COMMERCIALWe have a team of Chartered Surveyors who offer specialist advice on all aspects of commercial property to a wide range of clients from private investors and owner occupiers to large institutions, government bodies and corporations.

LAND AND FARMSOur Land and Farms division specialises in managing and marketing rural properties, including estates, land, farms and equestrian properties.

PROPERTY SOURCING

Our Property Sourcing service is designed to help clients find and purchase suitable properties across London, whether they are for investment or occupancy.

Contact us now to find out how we can help you.t: 020 3040 8469e: [email protected]: chestertonhumberts.com

*Chesterton Humberts Mid-year Forecast, June 2013

You don’t need to be told, but your finances are not always straightforward and, in terms of life’s priorities, they often come after cases, family and friends. With limited time to manage your money, whether chasing income, sorting out tax, paying chambers expenses or planning your retirement – when do you do it all?

You need someone when you need them; someone who can deal with your financial needs professionally and promptly; someone who understands your world, de facto.

The case for banking with Duncan Lawrie Private Bank…As a Duncan Lawrie banking client you are able to phone or meet your Bank Manager when you want. Knowing how busy you are, they will be happy to visit you in Chambers – even early evening when you have finished work.

On average, Duncan Lawrie’s Bank Managers have been there for over 10 years – and so, from the start, you can be sure they will be committed to supporting you with integrity, professionalism and thoroughness, and you can be confident this connection will last.

You may have non-standard banking needs or finances that need a high degree of individual attention, but this is not unusual with Duncan Lawrie clients. Their traditional, one to one personal service means they can be as accommodating as possible. Because your Bank Manager is familiar with your financial position, they can make decisions (about loans, for example) on an individual basis, so they can give you an answer fast.

Duncan Lawrie’s banking service offers all this and more:

• Current account banking with a combined credit/debit card and online banking

• Contact details for your personal Bank Manager, including their direct line, email address and mobile phone number

• Flexible borrowing, including loan and overdraft facilities (subject to status), and speedy decisions.

* Survey by Ledbury Research of 252 Duncan Lawrie clients.Duncan Lawrie Private Banking is a trading name of Duncan Lawrie Holdings Limited and its subsidiaries, represented in the UK by Duncan Lawrie Limited and Duncan Lawrie Asset Management Limited. Registered numbers 998511 and 1160766 respectively and registered in England. Authorised and regulated by the Financial Services Authority.

You be the Judge – a bank that’s right for you?

In a world where chaos and confusion seem to be the order of the day, it is wonderful to

walk into a sanctuary of calm efficiency.Duncan Lawrie client since 1999

“”

The case for wealth management with Duncan Lawrie Private Bank…Further cross examination reveals Duncan Lawrie is more than just a bank. As well as first class banking, Duncan Lawrie offers wealth management services. If your money is currently divided among various bank accounts, savings, ISAs and pensions, your Duncan Lawrie Wealth Manager can help you to organise it to create tax-efficient plans that will provide for the current security and future prosperity you want for yourself and your family.

When you’re busy, it’s often easier to deal with one highly reliable organisation you can trust. Duncan Lawrie will look after your everyday banking and financial needs, but with a much higher level of personal attention than you’d receive from most other banks. With them, you can be certain your finances will be well-organised, planned for the future, and you’ll save time and trouble.

The closing argument Although Duncan Lawrie offers a highly personalised service that doesn’t mean they charge premium prices. Their charges are clear, transparent and easy to understand because, as always, they believe in playing fair.

Duncan Lawrie treats everyone as an individual, so they do not insist that you keep a minimum credit balance to benefit from their banking services. However, keep £250,000 with a Duncan Lawrie Wealth Manager, and they will waive the £25 monthly fee for a bank account.

The final piece of evidenceDuncan Lawrie has always focused on their clients’ needs and wishes, and how best they can fulfil, or even surpass them. In a recent client survey*, 65% of banking clients scored their Duncan Lawrie Bank Manager 10/10 with an overall client satisfaction rating of 81% which compares with a peer group benchmark of 61%.

Pass your judgementTo find out more about Duncan Lawrie and their services:

T: 0845 680 8778 Monday to Friday between 9am and 5pm to speak to John Hilson or 07590 452440 outside of these hours. E: [email protected] W: www.duncanlawrie.com/bank

I think I’ve died and gone to banking heaven!A very happy Duncan Lawrie client

“ ”

It is the ability to ring up and speak to an intelligent and articulate professional that makes

Duncan Lawrie stand-out from the crowd.Retired High Court Judge and Duncan Lawrie client since 2007

“”

HOME INSURANCE ENHANCED

With 90 years’ experience insuring homes, we understand that some cover needs to be as unique as the lifestyle and possessions it protects; from golf buggies to antique jewellery.

That’s why we’ve partnered with Aqueduct Underwriting Limited to create Home Insurance Enhanced – bespoke high value protection that’s defined by you.

Enhanced covers homes that would cost over £800,000 to rebuild and require higher levels of content cover with valuables totalling more than £80,000. It also provides specialist cover for things like fine art, antiques and jewellery.

Home Insurance Enhanced is arranged and administered by Aqueduct Underwriting Limited – underwritten by a panel oftrusted insurers.

BECAUSE YOU KNOW YOURST ANDREWSFROM YOURCARNOUSTIE.

GET £100 M&S VOUCHERSWHEN YOU BUY A POLICY BY 31 DECEMBER 2013.CALL NOW FOR A TAILOR MADE QUOTE.0800 072 5056 quoting e646Calls may be recorded and monitored. Call charges will vary. Lines are open 9.30am to 5.30pm Monday to Friday.Terms and conditions apply. See below for details.

Terms and conditions: You’ll receive £100 M&S vouchers if you buy a new Enhanced policy by 31 December 2013. You’ll receive your vouchers 75 days after your policy has started, if your premiums are up to date and your policy is still active. We may withdraw this offer at any time. Existing and previous home insurance customers who have held a policy with us in the last six months, staff and shareholders of Legal & General are not eligible. Not to be used in conjunction with other offers. No cash or other alternatives available.

Legal & General Distribution Services Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales number 8083925. Registered Offi ce: One Coleman Street, London EC2R 5AA.

09/13 A001628

50740.05_LG_GI_MNW Press_Col_BarristerMag_297x210_v11.indd 1 02/09/2013 10:37

Barristers Accounts and Tax ServicesThe taxation treatment of barrister’s accounts differs from that for most other individuals.With many years of experience acting for barristers and dealing with barrister’s taxationaffairs Bloomer Heaven have built up a wealth of knowledge in this area.In light of the issues currently affecting the profession we now offer a fixed fee basis toall barristers based upon annual fee income. The fee includes:

l Preparation of annual accountsl Preparation and filing of self assessment returnsl Advice regarding payment of tax liabilities

Pupillage Offer

For most pupil barristers, the Bar is their first experience of self employment. To help get things right from the start, we charge a reduced fee of £99 for dealing with the first tax year of pupillage – thisincludes accounts preparation, tax registration and tax return completion.For more information on VAT Services, HM Revenue & Customs enquiries, inspections and visits , Detailed Tax Planning and Retirement.

Rutland House, 148 Edmund Street, Birmingham B3 2FDT: 0121 236 0465 F: 0121 236 1465E: [email protected]:www.bloomerheaven.co.uk

Barrister Advert 180mm x 125mm_Layout 1 23/10/2012 12:15 Page 1

Citroen Wells - Chartered AccountantsFirst class service at affordable pricesExpert accounting services for chambers and barristers

At Citroen Wells we’re all about taking the pressure off… we believe inproviding an unrivalled level of service. So whether you’re a barrister orchambers – we’re here to help. Whatever the financial issue, Citroen Wellshas the expertise in:

Email us using our dedicated Barrister and Chambers e-mail address:[email protected], visit www.citroenwells.co.uk or call 020 7304 2000Citroen Wells, Devonshire House, 1 Devonshire Street, London W1W 5DRAsk to speak to David Rodney or David MarksRegistered to carry on audit work in the UK and regulated for a range of investment businessactivities in the UK by the Institute of Chartered Accountants in England and Wales.

CALL US NOW ON

02073042000 Tax, PAYE and VAT investigations

Accounts and tax return preparation

Bookkeeping, VAT return and payroll services

Constructive tax and financial planning

Accountants reports for commercial litigation, investigations, asset tracing and insolvency

Why use a highly qualified, Independent Financial Planner?

After all, aren’t they all the same?

Well, to a point, Lord Copper, as they say.

Let’s be clear about this. Money is actually just another tool at your disposal, in the same way as your health and education are, in order to achieve your life’s goals. The reality is that the complexities surrounding money can sometimes become a stumbling block rather than an enabler.

Unless we know how much money we need to achieve life’s goals and comfortably secure our future, you may always live with the fear you may not achieve your goals.

Many clients ask themselves the following questions:

1. Do I yet have enough money to retire, or work as I choose? If not, when will that point occur?

2. If I had died today, would I have left the legacy and support for those around me that I would like to?

3. Am I getting clear, unbiased, Independent advice about my money?

We provide clear advice to make those dreams a reality through Independent, fee only Financial Planning coupled with a transparent approach to Investment Management based on Nobel prize winning research.

Our aim is to cut through the complexity of the investment world to allow our clients to feel secure about their future and to feel comfortable in their relationship with us. We pride ourselves that a client’s voice is their security code, not a number.

We have been awarded both the prestigious Chartered Financial Planner as well as the Accredited Financial Planning firm designation. At the beginning of 2013 less than 3% of UK firms held these awards.

As an independent, fee-based Financial Planning firm, trust and professionalism is at the heart of who we are.

Perhaps this passion for professionalism is why we have attracted so many other professionals as clients. They recognise and appreciate the process.

But talk is cheap. To see if we can ‘Walk the Walk’, contact us on 0845 123 3889 or [email protected] for an initial no obligation discussion at our expense. We will even provide the coffee!

If you can keep your head when all about youAre losing theirs…;

If you can trust when all men doubt you,But make allowance for their doubting too...

Rudyard Kipling

If...

This advertisement has been issued by SCM Private which is authorised and regulated by the Financial Conduct Authority - Registration Number 497525. The SCM Bond Reserve Portfolio commenced on

1st June 2011 and the SCM Absolute Return and SCM Long-Term Return Portfolios commenced on 8th June 2009.

Find out why we believe we have a competitive advantagewww.scmprivate.com 0207 838 8650

PRIVATEscm The Investment Family

Past performance should not be seen as a guide to future returns. The value of investments and the income from them can go down as well as up and investors may not recover the amount of their original investment.

SCM Bond Reserve Portfolio

SCM Absolute Return Portfolio

SCM Long-Term Return Portfolio

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Annualised Return Since Inception to

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• Specialist investors• Highly diversified portfolios• Contrarian mindset

• Less cost = more performance• 100% transparent• Targetting consistent performance

A GrowingInvestment

UPM TILHILL

UK Forest land has performed remarkably wellthrough these turbulent times. Demand fortimber and wood products of all types is forecastto increase dramatically over this decade.

The UPM Tilhill and Savills Forest Market Report2012 identified a 49% increase in commercial forestvalues in the year to September 2012.

Recent IPD UK Forest Index data shows a total returnof 18.3% over 1 year and 17.7% over 5 years – farbetter than equities, gilts or commercial property overthe same period.

Commercial forest investments from £100,000 to£2,000,000+ are available in the UK and benefit from:• No income tax on timber sales.• 100% Inheritance Tax exemption (after 2 years

of ownership).• Capital Gains Tax only applies to the land, not

the trees.• Suitable for inclusion in a SIPP.

They provide:• medium to long term, asset backed investments.• flexible cash flows.• an opportunity to benefit from rising timber values.• green credentials.

ScotlandJason SindenTel: 01387 711211 Mob: 07768 702646Email: [email protected]

EnglandGuy WarrenTel: 01524 272249Mob: 07789 653816Email: [email protected]

UPM Tilhill, the UK’s largest private forestmanagement company, can provide you with adedicated woodland investment advice servicethrough our specialist team of advisors.

We also have a network of professionally qualifiedforesters serving the UK and can deliver a fullmanagement service to forest owners, whatever theirrequirements.

Commercial forestry investments are also availablethrough UPM, our parent company in Finland, alongwith opportunities for purchasing lakeside cabin plotsin Finland.

If you would like further information, please donot hesitate to contact:

Forests – a place to invest your capital

www.upm-tilhill.com

UPM Tilhill Barrister Ad_Layout 1 20/08/2013 10:29 Page 1

LIGHTHOUSEWEALTH www.lighthousewealth.co.uk/Partners

Lighthouse Wealth, part of Lighthouse Group, one of the UK’s largest financial advisory companies, specialises in helping high net worth individuals create and preserve wealth.

We achieve this by taking a comprehensive approach to wealth management. We offer far morethan investment advice – although naturally this is animportant part of what we do. We take into accountyour whole financial situation and develop and agreewith you a complete approach to the management and growth of your wealth, for you, your family andfuture generations.

To find out how you could benefit from our professionalapproach to wealth management, including:

• growing your wealth

• protecting your income and lifestyle

• reducing your tax liability*

• reviewing your mortgage arrangements.

Call Karl Osmond, Partner, on 020 7065 5609

[email protected]

We help high net worth individualscreate and preserve wealth

* The FCA does not regulate all forms of tax planning. Lighthouse Wealth Limited, trading as Lighthouse Wealth, is an appointed representative of Lighthouse Advisory Services Limited which is authorised andregulated by the Financial Conduct Authority. Lighthouse Wealth Limited is a wholly owned subsidiary of Lighthouse Group plc. Registered in England No. 03970262.. Registered Office: 26 Throgmorton Street,London, EC2N 2AN.

You should talk to us if you:• have unrealised capital gains*• have done nothing to reduce

your inheritance tax liability*• need to review your pensions

and investments• would like professional advice on

achieving your financial goals.

LH Wealth Barrister advert 2013-08-11_Layout 1 07/08/2013 12:33 Page 1

31 Dugdale Hill Lane, Potters Bar, Herts EN6 2DPT: 01707 850969 www.bradish.co.uk [email protected]

TAX RETURNS & ACCOUNTS FOR BARRISTERS

• Fixed fees

• Meetings in Chambers

• Timely service

• Monthly newsletter

Call Martyn Bradish for a free, noobligation meeting

Visit the barristers & judges page in the services section of our website at www.bradish.co.uk

DBEACCOUNTING SERVICES

•Accountancy • Taxation •• Consultancy Services •

Initial consultation is free33 Anglesey Court Road, Carshalton SM5 3HZ

Business / fax line 020 8395 1031Mobile 07533 286346

[email protected]

AccountancyBookkeeping, financial and accounts preparation, budgeting

and forecasting, management accounting, payroll.

TaxationValue added tax, personal income tax, business income tax,

corporation tax and capital gains tax.

ConsultancyComputerised accountancy systems and company

secretarial services.

AccreditedEmployer

David Ealing is licensed and regulatedby the ATT under license number 3878













































A GrowingInvestment

UPM TILHILL

UK Forest land has performed remarkably wellthrough these turbulent times. Demand fortimber and wood products of all types is forecastto increase dramatically over this decade.

The UPM Tilhill and Savills Forest Market Report2012 identified a 49% increase in commercial forestvalues in the year to September 2012.

Recent IPD UK Forest Index data shows a total returnof 18.3% over 1 year and 17.7% over 5 years – farbetter than equities, gilts or commercial property overthe same period.

Commercial forest investments from £100,000 to£2,000,000+ are available in the UK and benefit from:• No income tax on timber sales.• 100% Inheritance Tax exemption (after 2 years

of ownership).• Capital Gains Tax only applies to the land, not

the trees.• Suitable for inclusion in a SIPP.

They provide:• medium to long term, asset backed investments.• flexible cash flows.• an opportunity to benefit from rising timber values.• green credentials.

ScotlandJason SindenTel: 01387 711211 Mob: 07768 702646Email: [email protected]

EnglandGuy WarrenTel: 01524 272249Mob: 07789 653816Email: [email protected]

UPM Tilhill, the UK’s largest private forestmanagement company, can provide you with adedicated woodland investment advice servicethrough our specialist team of advisors.

We also have a network of professionally qualifiedforesters serving the UK and can deliver a fullmanagement service to forest owners, whatever theirrequirements.

Commercial forestry investments are also availablethrough UPM, our parent company in Finland, alongwith opportunities for purchasing lakeside cabin plotsin Finland.

If you would like further information, please donot hesitate to contact:

Forests – a place to invest your capital

www.upm-tilhill.com

UPM Tilhill Barrister Ad_Layout 1 20/08/2013 10:29 Page 1

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Exchange Traded Funds - a 21st Century Investing RevolutionExchange Traded Funds- known as ETFs- are one of the biggest investment modernisations in decades. Launched in the UK in 2001, assets have rocketed to £200Bn throughout Europe and £1.3Tn worldwide. Are ETFs a fad or will they revolutionise how you invest your money? Adam Laird, Passive Investment Manager at Hargreaves Lansdown, explains more.

HMRC’s attack on UK taxpayers using offshore structures to evade tax has been progressing steadily over a number of years.

By Andrew Watt, Partner, Watt Busfield Tax Investigations LLP

Investments; a Classic DecisionBy Nigel Case, owner of the London based Classic Car Club

A Tale of Two EconomiesJames Humphreys, Investment Manager at Duncan Lawrie Private Bank, talks about the changing faces of the UK

economy and how bad times turning to good may provide some investors with an exciting opportunity.

Five tax-sheltered investments you should considerBy By Jason Butler Chartered Financial Planner and Investment Manager at City based Bloomsbury

How much do you pay for your portfolio?By Matthew Aitchison BA (Hons) APFS, Chartered Financial Planner

Investing in history: Why it pays to dig a little deeperBy Paul Fraser, founder of Paul Fraser Collectibles

Ensure your finances are in orderBy Mike Warburton, Director, at leading business and financial advisors Grant Thornton UK LLP.

Implied beliefs in personal investingBy Stuart Fowler, Director, Fowler Drew Limited

Inertia works (sort of)A line-up of glitzy business celebrities have signed up to promoting the government’s new pension initiative, but many legal professionals may get left behind. By Laith Khalaf, Head of Corporate Research, Hargreaves Lansdown

Pension lifetime allowance cut – ‘it could be you…’By Dave Downie, Technical Manager, Standard Life

Contents:

6 personal finance & wealth management supplement the barrister 2013

There is no shame in admitting it- busy

people don’t have the time to look after

a portfolio of shares. We all want our

savings so that they grow for when

we need them but to choose a mix of

companies takes, well, more time and

effort than most of us are able or willing

to give. That’s why for decades investors

have used stockbrokers, investment

managers or funds- such as unit trusts or

OEICs- where a professional makes the

investment decisions.

Now products like Exchange Traded Funds (or ETFs for short) are now changing investment management.

A passive approach

ETFs have been hugely popular. The first was Standard and Poor’s Depository Receipt (affectionately known as “spiders” because of its SPDR acronym) launched on the New York Stock Exchange in 1993. There are now more than 900 available to UK investors and investors have flocked because they approach investment management from a different angle.

The vast majority passively follow a stock or bond market index (like the FTSE100 or the S&P500) at low costs. This is called index investing and it is not a new concept- the Investment Management Association estimate that around 9% of UK funds are index trackers. But it has grown in popularity for two reasons:

First, it has been shown repeatedly that the average active fund manager, trying to choose companies and themes which will beat the market, does a pretty poor job. Whilst there are some managers who consistently outperform, it takes

time and dedication to do the research necessary to find them.

But the other attraction is the low charges. Indices have rules on which companies to buy and when, eliminating the need for expensive researchers. There is a revolution forming about cost in finance and ETFs are leading the resistance - the average ETF costs under 0.4% each year versus 1.5% for an actively managed fund.

Access all areas

ETFs have stood out because they gave individuals access to markets where they could not previously invest. ETFs are now available that follow all sorts of assets- from simple funds of blue chip UK shares, to small Latin American companies or Russian corporate bonds.

One area they transformed is commodities. ETCs are Exchange Traded Commodities- a close relative of ETFs which invest in metal, oil or agricultural produce. When the gold price doubled in the 3 years following the collapse of Lehman Brothers in the US, investors piled into gold ETCs. Before ETCs, to invest in gold you had to find a broker who would sell coins or bullion (often at a higher cost than the metal) pay around 0.5% to store and insure your holding each year. There might also be difficulties and charges when selling. Some banks only consider customers with over £1M to commit.

Gold ETCs changed all this- they allow investors to buy a product that holds the physical metal itself, for only the cost of the stockbroking commission (often less than £10 with an online trading account) and charges less than 0.3% each year.

One mission, many flavours

So far straightforward? That has been the appeal. But there is one detail that ETF investors need to understand. There are two different ways that ETFs invest- physical and synthetic. Physical ETFs actually hold the investments- buying every (or the majority of) stocks for the index they track. Synthetic ETFs on the other hand use a derivative to give the same return as the index- they also hold (normally unrelated) shares or bonds as collateral to ensure that there is enough to repay investors if the derivative provider got into problems. Synthetic ETFs may seem more complex but there are times when they are better in a portfolio- they tend to be cheaper than physical alternatives, they track more accurately and they can give access to markets where it is difficult for physical ETFs to operate.

There is one other product type, called Exchange Traded Notes (or ETNs). Whilst these work in much the same way as ETFs, they are structured as a company loan. Whilst some hold collateral, others do not and your money is at risk if the provider gets into financial difficulty. These products are normally only suitable for institutional or sophisticated investors.

The key for investors is to ensure that you understand what you are investing in. ETF providers are leading the field in clarity- particularly since 2008 most providers will declare any important details about how and what they track. Most ETFs will have a factsheet and a Key Investor Information document and your stockbroker should provide these for you.

Exchange Traded Funds - a 21st Century Investing RevolutionExchange Traded Funds- known as ETFs- are one of the biggest investment modernisations in decades. Launched in the UK in 2001, assets have rocketed to £200Bn throughout Eu-rope and £1.3Tn worldwide. Are ETFs a fad or will they revolutionise how you invest your money? Adam Laird, Passive Investment Manager at Hargreaves Lansdown, explains more.

Barristers Accounts and Tax ServicesThe taxation treatment of barrister’s accounts differs from that for most other individuals.With many years of experience acting for barristers and dealing with barrister’s taxationaffairs Bloomer Heaven have built up a wealth of knowledge in this area.In light of the issues currently affecting the profession we now offer a fixed fee basis toall barristers based upon annual fee income. The fee includes:

l Preparation of annual accountsl Preparation and filing of self assessment returnsl Advice regarding payment of tax liabilities

Pupillage Offer

For most pupil barristers, the Bar is their first experience of self employment. To help get things right from the start, we charge a reduced fee of £99 for dealing with the first tax year of pupillage – thisincludes accounts preparation, tax registration and tax return completion.For more information on VAT Services, HM Revenue & Customs enquiries, inspections and visits , Detailed Tax Planning and Retirement.

Rutland House, 148 Edmund Street, Birmingham B3 2FDT: 0121 236 0465 F: 0121 236 1465E: [email protected]:www.bloomerheaven.co.uk

Barrister Advert 180mm x 125mm_Layout 1 23/10/2012 12:15 Page 1

7personal finance & wealth management supplement the barrister 2013

How you can use ETFs

Now I won’t promise that ETFs are the key to good investing, but they are useful tools to help get you there. ETFs trade like shares throughout the day on a stock market making them perfect for getting quick exposure to an attractive area.

Think of them like building blocks- elements that you can use to make a portfolio of your own. Different investors have different strategies and one of the most popular is the “Core and Satellite” approach- where you have a core of low cost ETFs in key areas and invest the remainder in riskier markets or opportunities that present themselves. It is an individual choice but a typical core part of a portfolio might have four areas:

• UK companies- The UK is our home market and holding shares in British companies entitles you to a share of their profits.

• UK Corporate Bonds- Corporate

Bonds are loans made to companies and investors receive a regular interest payment from holding them.

• Overseas shares- In our global economy, it is important to look beyond the UK and there are a number of broad ETFs covering both developed and emerging overseas markets.

• Gilts- Gilts are UK government debt which is considered very low risk though the returns are low too- currently below inflation.

I would suggest that most investors keep around 40% of the core in UK companies, 25% in corporate bonds and split the remainder between overseas shares and gilts- any investor should have a minimum of 10% in foreign companies and more adventurous investors will increase this further.

In the end the decision is yours but whether you choose to manage your own investments through a stockbroker or

use a financial advisor, make sure that ETFs are on the table.

Risk Warning:

The value of any investment can go down in value as well as up, so you could get back less than you invest. It is therefore important that you understand the risks and commitments. This article is not personal advice based on your circumstances, if you are unsure about the suitability of an investment please speak to a financial advisor

Adam Laird

Passive Investment Manager

Hargreaves Lansdown

One College Square South,

Anchor Road, Bristol, BS1 5HL

tel: 0117 980 9884

web: www.HL.co.uk

personal finance & wealth management supplement the barrister 20138

High profile investigations into customers of Irish banks in

the Isle of Man preceded the Offshore Disclosure Facility in

2007. This was followed two years later by the New Disclosure

Opportunity, hot on the heels of which came the Liechtenstein

Disclosure Facility (LDF) prompted by the leak of customer

data from one of the leading banks in the Principality. There

then followed a number of disclosure campaigns aimed at

various professions and trades such as doctors, dentists and

plumbers. A landmark agreement with Switzerland signed in

October 2011 designed to flush out untaxed funds in financial

institutions there culminated on 31 May 2013 with amounts

being deducted from undeclared accounts and paid over to the

UK Exchequer. It is distinctly possible that over the next few

years similar agreements will be struck with other havens to

which funds were moved prior to the May deadline.

Events this year have been moving at breakneck speed. In

February the UK and Isle of Man Governments signed a

memorandum of understanding underpinning a disclosure

facility similar, but not identical, to the LDF. This was followed

by similar arrangements with Guernsey and Jersey. And

last month saw a commitment from the Overseas Territories

such as Gibraltar, Bermuda, Cayman Islands and the British

Virgin Islands(BVI) to sign up to the Government’s strategy

on global tax transparency. Coincidentally, at about the same

time, national newspapers published details of highly sensitive

information leaked from financial institutions in the BVI. Finally,

Singapore has announced that it is to implement stricter tax

evasion measures as part of which consideration will be given

to ceasing to act for many of their banks’ wealthiest clients.

While this will undoubtedly lead to an increase in the number

of suspicious transaction reports it will not in the short term

involve automatic exchanges of sensitive information. However,

it would be surprising if such measures are not eventually

implemented.

The Manx Disclosure Facility (MDF) – and those relating to

Jersey and Guernsey – run from 6 April 2013 to 30 September

2016 at which time information will begin to be exchanged

automatically. The benefits include-

• A 10% penalty for years up to and including 2007/08

and 20% for 2008/09 onwards. In cases of failure to notify

liability, the penalty for years to 2008/09 will be 10% and 20%

for 2009/10. For 2010/11 onwards the new offshore penalties

legislation applies which means that liabilities relating to

Guernsey and the Isle of Man will be subject to a 20% penalty

while those relating to Jersey will be penalised at 30%.

• No penalty where reasonable care has been taken.

• The assessment period is limited to accounting/tax

years commencing on or after 1 April 1999. However, where

the disclosure relates to a bank account outside the UK or the

relevant Territory, which was opened through a UK branch or

agency of the bank, the assessment period is 20 years from the

beginning of the tax year in which the disclosure is made. In

exceptional cases, where reasonable care is demonstrated and

an incorrect return has been submitted or where the offence

is failure to notify and reasonable excuse for the failure is

demonstrated, the assessment period is 4 full tax years from

the end of the tax year in which the disclosure is made.

• A single point of contact within HMRC for disclosures.

This is extremely useful for agreeing possibly contentious

issues such as

domicile status

or the concept

of ‘reasonable

care’, before

the disclosure is

submitted thereby

HMRC’s attack on UK taxpayers using offshore structures to evade tax has been progressing steadily over a number of years. By Andrew Watt, Partner, Watt Busfield Tax Investigations LLP

The articles in this supplement are intended for general information only and

should not be construed as advice under the Financial Services and Markets Act

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limiting the possibility of time consuming enquiries on the

report.

• ‘No names’ contact with HMRC prior to registration for

advice on matters connected with the facility.

Anyone who has been the subject of an in depth investigation

prior to 6 April 2013 and did not make a full disclosure of

offshore investments can participate in the relevant facility, but

will not be entitled to favourable terms on penalties or limited

assessable period. Conversely anyone who has been notified

prior to 6 April 2013 that he is to be so investigated is simply

not entitled to participate in the facility if that investigation was

not concluded before 6 April. An ‘in depth’ investigation in

this context is one which is supported by HMRC’s investigation

powers. It includes those which ended with a letter of offer,

whether or not a penalty was charged, a statement of assets

and liabilities and a certificate of full disclosure.

Unlike the LDF, these facilities do not provide automatic

immunity from prosecution. However, HMRC have said that

they are extremely unlikely to start a criminal investigation for

a tax-related offence if a full and accurate disclosure is made

and the source of the funds is not ‘criminal activity’ other than

tax evasion.

Anyone with undeclared profits or gains outside of the UK

(other than in Switzerland) can acquire an asset in one of the

territories before 31 December 2013 and be eligible for the full

benefits of the relevant facility.

This is not intended to be a comprehensive account of the

three disclosure facilities relating to the Crown Dependencies

and anyone who thinks they may be entitled to participate and

wishes to do so, should take their own independent advice.

The initiatives mentioned above highlight HMRC’s determination

to clamp down on serious tax fraud. However, they are also

pursuing aggressive avoidance on a quite unprecedented

scale. For example, raids were carried out some time ago on

offices on the Isle of Man and in the UK on a high profile firm

of tax consultants which provides widely marketed avoidance

schemes, in the course of which arrests were made. In recent

months HMRC announced that it was criminally investigating

a number of investors in some of these schemes. And a few

days ago it has been reported that the firm’s CEO and a senior

colleague have been charged with offences involving abuse of

the tax rules surrounding charitable giving. And to complete

this account of HMRC’s anti-avoidance drive HMRC has been

issuing Code of Practice 9 investigation notices on many of the

remaining investors in the firm’s schemes alleging serious tax

fraud. The investigation process allows 60 days from service

of the notice for the target to make an outline disclosure of

any tax fraud committed – not necessarily solely related to

the particular avoidance scheme. Those who entered such

schemes on the basis of assurances , quite possible supported

by legal opinion, from a reputable provider and from other

professionals including independent financial advisers will

need to take care as to how they respond to HMRC’s challenge.

Andrew Watt

Partner, Watt Busfield Tax Investigations LLP

[email protected]


On the 12th of July at the Bonhams Auction at Goodwood Festival of Speed, a Mercedes Benz W196 Grand Prix car, once driven by the legendary racing driver Juan Fangio, sold to an anonymous bidder for £19.6 million. This was a world record high for a car sold by public auction fuelling the ‘gold rush’ flames of classic car investment.

However this and other high profile sales do not really reflect the ‘real’ classic car experience. The main issue with cars as assets is that they are big cumbersome things and therefore difficult to store and maintain. Plus, unlike their modern counterparts, they rapidly deteriorate if they are not properly cared for. In addition to dry, secure storage they need to be insured, taxed, serviced and maintained and most importantly they need to be used. There is nothing worse than a car sitting around for long periods of time without being started regularly and gently exercised.

If you own a Mercedes 280 SL Pagoda it is likely it has at least doubled in value over the last 10 years but on the flipside it is also likely you have spent at least this amount looking after it.

This equation becomes more acute the less the car is worth. A good Triumph Stag is a mighty fine car. A creamy smooth 3-litre V8 engine; a four-seat convertible with a hard top for the winter. It is just about the perfect classic car, handsome and

great to drive with plentiful part supply. But you still need to put it in a nice dry garage, insure, service MOT and, if it is post 1972, pay for road tax.

Unlike the Mercedes SL time hasn’t been quite so kind to the dear old Triumph Stag. The same ten-year period has only seen only a modest rise in values and you can still pick up a fantastic example for around £10k.

As with most things in life there is a fair degree of luck in choosing the right car in the first place. Ferrari 246 Dino, Porsche 911 RS, Aston Martin DB5 while not exactly cheap a decade ago, have risen massively in value. If you bought a poor car in the first place you would have sunk a small fortune into putting it right but you would now have an extremely valuable and desirable car. The trick is to choose the right car and then do your homework before committing large sums of your hard earned money.

For specialist advice, Jonathan Silverman a commercial partner with City law firm Silverman Sherliker LLP, who for a number of years has advised both trade and private investors active in the classic car market could be your first port of call. Last year he was involved in the transaction to sell a Ferrari 250 GTO once campaigned by Stirling Moss. It sold for an undisclosed figure to a US buyer, where the price is reported to have excessed $20m.

Investments; a Classic DecisionBy Nigel Case, owner of the London based Classic Car Club


“The concern is that clients even at the ‘investment level’ tend to let ‘their heart rule their head’ and accept blindly statements made to them by vendors about a car’s history and condition”.

At this end of the market the primary consideration is provenance. Huge value can be added to a car if it has an interesting history or a successful racing career. Equally small differences in specification or model can make a big difference to the purchase price. As such meticulous research and thorough investigation into the history of the car, checks on title and professional purchase agreements are essential, which is why the services of experienced specialists such as Mr. Silverman are so important. It also follows that post purchase investigation and preparation of a history file can add significant value to a car that has poorly prepared documentation.

This article is about investment in classic cars but it has only really concerned itself with monetary matters. A classic car is far more of an emotional investment from which sometimes, with a prevailing wind of good fortune, after all of the expense of maintenance and storage, you might just turn a profit. If you aim to buy a car purely to put it away for posterity or indeed prosperity consider the cost implications long and hard before doing so. Buying a car simply with a view to making money is frankly missing the point.

The best advice is that if the smell of oil and petroleum don’t set your pulse-a-racing steer well clear and buy something that does. A far better proposition as an interesting alternative investment would be easy to store and maintain: something with an emotional attachment and a good following. Wristwatches, art or cameras are great examples. While these items require a modicum of maintenance this is nowhere near as onerous as with cars. The primary reason for buying a classic car, with all of the pain and heartache that comes along for the ride, should be for the sheer bloody love of it!

Nigel Case is the owner of the London based Classic Car Club a private members’ club that runs a large fleet of classic cars for its members to enjoy as if they were their own without any of the hassles and commitments of ownership. From Aston Martins, E-Type Jaguars and Mercedes SL Pagodas to Mini Coopers, Ford Mustangs and Porsche 911s the club has around fifty cars that members drive through use of a simple point system.

If your heart is absolutely set on ownership the club’s new specialist storage facility, Car Vault London can help. They have dehumidified chambers with battery conditioners and on site mechanics to check the levels on your four-wheeled beauty before you venture out onto the highways and byways. They can even arrange deliveries and collections and offer a range of additional services.

Jonathan Silverman has been a member of the Classic Car Club since 1995 and is also an avid collector of cameras. He can be reached on: 020 7749 2700 - [email protected]

www.ClassicCarClub.co.ukwww.CarVaultLondon.co.ukinfo@classiccarclub.co.uk020 7490 9090


31 Dugdale Hill Lane, Potters Bar, Herts EN6 2DPT: 01707 850969 www.bradish.co.uk [email protected]

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Dickens had a lot to say about our current economy, describing

it as: “It was the best of times, it was the worst of times, it was

the age of wisdom, it was the age of foolishness…”

OK, so Dickens wasn’t actually talking about the current

economy, but there are many reasons why his description of

the duality of 18th century Europe still applies today.

Six years ago when the financial crisis began, a deep gloom

settled over the British economy. The banking sector in

particular was hit hard. The crisis, which began with queues

forming outside branches of Northern Rock, soon turned to

the drying up of consumer lending, the collapse of high street

retailers and widespread unemployment.

Since then however, what Dickens may have referred to as a

metaphorical ‘winter of despair’ has given way to a ‘spring

of hope’, or what is more commonly referred to in modern

parlance as the ‘green shoots’ of economic recovery.

The recovery, as with the crisis, has started with the banks

which went through a period of internal restructuring and

tighter regulation. The banking system is both better capitalised

and supervised thanks to various domestic and international

initiatives and because Lloyds Banking Group’s shares have

risen above the Government’s purchase price, it is only a matter

of time before the Government begins to sell down its stake.

Elsewhere, with an election now two years away, George

Osborne has turned to the tried and tested method of getting

the UK economy moving: namely, stimulating the housing

market. The belief is that a buoyant housing market and

improving consumer confidence will be fillips for other areas

of the economy.

However, before becoming too optimistic, it is prudent to

consider what might go wrong. Firstly, while the economy

is improving, it is still far from strong. The Government’s

measures to stimulate housing demand have not been met by

increased supply, so a housing bubble could inflate. In addition,

the UK could be affected by the considerable international risks

to the global economy. Any sudden economic shocks would hit

the banking sector hard, sending our economy hurtling back to

the start like an incredulous game of snakes and ladders.

To continue the theme and paraphrase Dickens, we are in a

unique position where ‘we have everything before us and yet we

have nothing before us’. Economic recovery means very little if

the underlying structure of our country remains in disrepair. As

a nation we consume more than we produce, our population

is ageing fast and our education system is falling behind our

international peers.

However in the comparatively small rise and fall of economic

cycles, there are opportunities all around for savvy investors

looking to take advantage of a market in the earlier stages

of recovery. Below, the investment experts at Duncan Lawrie

Private Bank have put together a short summary of a number

of markets and guide you through those that are seeing better

times and those that might see the worst:

A Tale of Two EconomiesJames Humphreys, Investment Manager at Duncan Lawrie Private Bank, talks about the changing faces of the UK economy and how bad times turning to good may provide some investors with an exciting opportunity.


The Banks

It is too early to say that the banking industry is fully

transformed. There is still plenty of work to do, particularly for

Royal Bank of Scotland, but also for the likes of Barclays and

some of the building societies. Most are still in the process of

ridding themselves of poor quality assets and reducing leverage.

However, they are in a much better position to deal with these

threats than in 2007 and enough has been done for us to be

more optimistic about the sector than at any time in the last

five years.

The Eurozone

One year on from European Central Bank (ECB) President Mario

Draghi’s statement that he would do whatever it takes to save

the single currency, he has not yet had to intervene in sovereign

bond markets. Trusting that the ECB would stand by as lender

of last resort has boosted sentiment in the Eurozone: European

equity markets are up 36% in sterling terms since last July. Over

the same period, the UK market has climbed around 25%.

UK Stocks

During July, defensive areas of the UK stock market, such

as pharmaceuticals and food producers, underperformed

the index, as investors took advantage of weakness in more

economically sensitive sectors that had suffered during the risk-

averse markets of June. The theme of mid cap outperformance

continued (‘cap’ meaning the size of a publically quoted

company and referring to the market value of the issued share

capital), while small caps performed in line with large caps.

Overall, the UK market finished up nearly 7% by the end of the

summer.

The International Market

In international equity markets the summer has been mixed;

in Japan the market took a pause after a strong run this year.

In contrast the US equity market rose by a little over 5%, while

Asia Pacific (excluding Japan) saw its equity index rise 2.2% in

sterling terms.

Overall there has been a striking divergence in performance

between the developed world and the Emerging markets. The

former have been growing in confidence, in step with their

brighter economic environment, whilst the latter, have taken a

hit , especially India, Indonesia and Turkey which are suffering

from the consequences of their current account deficits and

collapsing currencies.

Fixed Interest

In sterling fixed interest markets, July saw yields come down

after a spike in June, when US Federal Reserve Chairman Ben

Bernanke sparked concerns that US interest rates would rise

sooner than expected. Cold water has subsequently been poured

on those expectations, and globally fixed interest markets have

improved as a result. Corporate bond indices were up almost

2% over the month.

Large Caps

Corporate earnings growth has been broadly positive. By the

end of July, nearly half the US large caps had reported second

quarter earnings, and over half of them beat expectations.

This bodes well for the remainder of the earnings season and

a parallel trend is expected for the UK market. Companies

remain cautious, but more optimistic in their outlook, which

can be seen most clearly in the pick-up in M&A activity in

recent months. Looking ahead, investors will continue to watch

corporate margins for signs of weakness or a return to the long-

run average. Global corporate earnings are expected to grow

9.0% in 2013 and 12.0% in 2014.

Currencies

In currencies, the yen remains the standout underperformer,

having fallen over 20.0% against the US dollar. The Government is

attempting to regain the country’s international competitiveness

and drive up tax receipts. Inflation expectations for 2014 are

around the Government’s 2.0% target, which suggests that for

the moment the market is willing to believe that Prime Minister

Abe will be successful in reflating the economy.

So while many retail investors see opportunities only when the

economy is firing on all cylinders, the truth is that some of the

best gains are actually to be made on the road to recovery.

Understanding the market in which you are investing is critical;

investment in capital markets comes with risks but the rewards

are commensurately higher. This type of investing is not for

everyone and seeking out good investment advice is advisable.

However, if done correctly, every investor has a chance to find

‘the golden thread’ within the current market.

personal finance & wealth management supplement the barrister 2013 15

LIGHTHOUSEWEALTH www.lighthousewealth.co.uk/Partners

Lighthouse Wealth, part of Lighthouse Group, one of the UK’s largest financial advisory companies, specialises in helping high net worth individuals create and preserve wealth.

We achieve this by taking a comprehensive approach to wealth management. We offer far morethan investment advice – although naturally this is animportant part of what we do. We take into accountyour whole financial situation and develop and agreewith you a complete approach to the management and growth of your wealth, for you, your family andfuture generations.

To find out how you could benefit from our professionalapproach to wealth management, including:

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Call Karl Osmond, Partner, on 020 7065 5609

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Five tax-sheltered investments you should considerBy By Jason Butler Chartered Financial Planner and Investment Manager at City based Bloomsbury

This year a new General Anti-Abuse Rule (GAAR) comes into

effect, with the aim of reducing tax avoidance. Tax avoidance

involves planning which, while legal, was “not what parliament

intended” and relies on exploiting loopholes and errors arising

in the drafting of legislation. The GAAR is a catch-all means by

which HM Revenue & Customs (HMRC) can stop tax avoidance

and this sits on top of a range of other anti-avoidance legislation

at HMRC’s disposal.

In this age of austerity and the post-GAAR world, ‘tried and

tested’ is very much the order of the day when it comes to tax

planning. What follows is a quick reminder of the features

of the main, non-aggressive, tax-favoured investments worth

considering.

Pension contributions

Pension contributions make sense if:

- you obtain a higher rate of tax relief on the contribution

than you expect to pay on the benefits, i.e. tax relief/income tax

on benefits of 45%/40; 40%/20% or 20%/nil respectively;

- you are permitted to take a proportion of the fund as

a tax-free lump sum (the standard maximum is currently 25%),

even if you do pay the same tax rate on the pension benefits as

you received on the contribution;

- your fund is unlikely to exceed the lifetime allowance of

£1.25m (from 6th April 2014), or £1.5m/1.8m if fixed protection

applies;

- you are happy to restrict access to the benefits until

age 55;

- you do not have guaranteed pension income of £20,000

per annum and you are happy to take at least 75% of the fund

as a taxable income;

- you do have guaranteed pension income of £20,000

per annum and you are happy to take at least 75% of the fund

as a lump sum subject to income tax;

- the virtual tax-free roll-up of the pension fund is more


attractive than the alternative of holding the capital outside the

pension.

Any pension contribution to be made in the 2013/14 tax year

must have been made by 5th April 2014. Personal contributions

to defined contribution schemes are paid net of basic rate tax,

i.e. £800 becomes £1,000 in the pension fund, and has the effect

of expanding the basic rate income tax band. Contributions to

defined benefit schemes are paid net of the member’s highest

marginal rate.

The effect of the contribution can be to:

- reduce the amount of income tax paid at the higher

and additional rates;

- permit reclamation of the personal allowance to the

extent that ‘adjusted net income’ falls below the £100,000

threshold and thereby provide effective relief of 60%;

- reduce or avoid the child benefit tax charge to the

extent that net adjusted income falls below £60,000;

- reduce the rate of capital gains tax on taxable gains

arising elsewhere from 28% to 18%.

A personal contribution must not exceed 100% of net relevant

earnings, which is basically most forms of income from

employment and self-employment (this includes trading income

from structures such as film partnerships). Contributions must

be within the annual allowance of £50,000 (although this falls

to £40,000 in 2014/15) and any carried forward unused annual

allowance from the three previous tax years in which the

investor owned a registered pension scheme.

For the purposes of determining annual allowance, each

contribution is assessed based on the pension input period (PIP)

end date of the pension plan. New personal plans default to

5th April but an election can be made to bring the PIP forward

to another date. It is essential to know the PIP end date which

applied to previous contributions, so that you can accurately

calculate the unused annual allowance and thus the maximum

contribution permissible.

With the right planning it is possible to make a contribution of

up to £240,000 in the 2013/14 tax year. If you pay income tax

at 45% it makes sense to maximise tax relief on contributions if

you expect total taxable income from all sources in retirement

to be at a lower rate than this.

Enterprise investment schemes (EIS)

Investment of up to £1m into the shares of one or more EIS

made in the 2013/14 tax year will qualify for income tax relief

of up to 30% of the gross amount invested, to the extent that you

pay income tax (no relief is given for national insurance). You

must obtain an EIS3 certificate from the EIS company, which

will be issued once it has been trading for four months, before

you can claim relief.

You can also invest a further £1m in 2013/14 and elect to

carry this back to the 2012/13 tax year, or defer making an EIS

investment until 2014/15 and elect to carry up to £1m of this

back to 2013/14, which might be useful if cashflow is tight.

Additional features of EIS investment include:

- Income tax relief on investment into an EIS is subject

to the shares being held for three years;

- EIS shares are exempt from inheritance tax once held

for two years;

- Once held for three years, the EIS shares could be

transferred to a discretionary trust and retained for a further

seven years before being sold to secure further permanent IHT

savings;

- Income tax relief is given if you incur a loss on disposal

in excess of the original net of tax relief cost, i.e. if the disposal

value is less than 70% of the gross cost;

- Income tax loss relief on EIS shares is not included

under the new tax relief restrictions which apply to other losses

from 6th April 2013;

- Capital gains arising from EIS shares disposed after

three years are free of tax;

- Capital gains arising from either the disposal of other

assets up to three years before or up to one year after the EIS

investment may be deferred to the extent that the gains before

tax are re-invested into the EIS;

- Any capital gains which have been deferred by re-

investment into the EIS will be washed out in the event of your

death;

- Most EIS shares qualify for business investment relief,

which allows UK resident non-domiciled individuals to remit

foreign income or gains to make their investment without

triggering a UK taxable remittance.

The following shows the net cash cost to an investor’s estate

of £100,000 invested into an EIS which has been held for two

years and against which capital gains tax deferral relief had

been claimed:

Gross investment £100,000

Less income tax (IT) relief (£30,000)

Net cost after IT relief £70,000

CGT deferral relief (£28,000)

Net cost after CGT relief £42,000

IHT saving on death (£40,000)

Net cost to the estate £2,000

There are several lower risk EIS offerings which focus on capital

preservation and the potential for returns slightly above deposit

interest by engaging in trading activities which are highly

You don’t need to be told, but your finances are not always straightforward and, in terms of life’s priorities, they often come after cases, family and friends. With limited time to manage your money, whether chasing income, sorting out tax, paying chambers expenses or planning your retirement – when do you do it all?

You need someone when you need them; someone who can deal with your financial needs professionally and promptly; someone who understands your world, de facto.

The case for banking with Duncan Lawrie Private Bank…As a Duncan Lawrie banking client you are able to phone or meet your Bank Manager when you want. Knowing how busy you are, they will be happy to visit you in Chambers – even early evening when you have finished work.

On average, Duncan Lawrie’s Bank Managers have been there for over 10 years – and so, from the start, you can be sure they will be committed to supporting you with integrity, professionalism and thoroughness, and you can be confident this connection will last.

You may have non-standard banking needs or finances that need a high degree of individual attention, but this is not unusual with Duncan Lawrie clients. Their traditional, one to one personal service means they can be as accommodating as possible. Because your Bank Manager is familiar with your financial position, they can make decisions (about loans, for example) on an individual basis, so they can give you an answer fast.

Duncan Lawrie’s banking service offers all this and more:

• Current account banking with a combined credit/debit card and online banking

• Contact details for your personal Bank Manager, including their direct line, email address and mobile phone number

• Flexible borrowing, including loan and overdraft facilities (subject to status), and speedy decisions.

* Survey by Ledbury Research of 252 Duncan Lawrie clients.Duncan Lawrie Private Banking is a trading name of Duncan Lawrie Holdings Limited and its subsidiaries, represented in the UK by Duncan Lawrie Limited and Duncan Lawrie Asset Management Limited. Registered numbers 998511 and 1160766 respectively and registered in England. Authorised and regulated by the Financial Services Authority.

You be the Judge – a bank that’s right for you?

In a world where chaos and confusion seem to be the order of the day, it is wonderful to

walk into a sanctuary of calm efficiency.Duncan Lawrie client since 1999

“”

The case for wealth management with Duncan Lawrie Private Bank…Further cross examination reveals Duncan Lawrie is more than just a bank. As well as first class banking, Duncan Lawrie offers wealth management services. If your money is currently divided among various bank accounts, savings, ISAs and pensions, your Duncan Lawrie Wealth Manager can help you to organise it to create tax-efficient plans that will provide for the current security and future prosperity you want for yourself and your family.

When you’re busy, it’s often easier to deal with one highly reliable organisation you can trust. Duncan Lawrie will look after your everyday banking and financial needs, but with a much higher level of personal attention than you’d receive from most other banks. With them, you can be certain your finances will be well-organised, planned for the future, and you’ll save time and trouble.

The closing argument Although Duncan Lawrie offers a highly personalised service that doesn’t mean they charge premium prices. Their charges are clear, transparent and easy to understand because, as always, they believe in playing fair.

Duncan Lawrie treats everyone as an individual, so they do not insist that you keep a minimum credit balance to benefit from their banking services. However, keep £250,000 with a Duncan Lawrie Wealth Manager, and they will waive the £25 monthly fee for a bank account.

The final piece of evidenceDuncan Lawrie has always focused on their clients’ needs and wishes, and how best they can fulfil, or even surpass them. In a recent client survey*, 65% of banking clients scored their Duncan Lawrie Bank Manager 10/10 with an overall client satisfaction rating of 81% which compares with a peer group benchmark of 61%.

Pass your judgementTo find out more about Duncan Lawrie and their services:

T: 0845 680 8778 Monday to Friday between 9am and 5pm to speak to John Hilson or 07590 452440 outside of these hours. E: [email protected] W: www.duncanlawrie.com/bank

I think I’ve died and gone to banking heaven!A very happy Duncan Lawrie client

“ ”

It is the ability to ring up and speak to an intelligent and articulate professional that makes

Duncan Lawrie stand-out from the crowd.Retired High Court Judge and Duncan Lawrie client since 2007

“”


cash-generative including things like film tax credit financing,

green energy, very short term development finance and football

season ticket funding. If you only receive back 70p in the pound

then you will have made nothing. If you receive back 100p in

the pound the return is in the region of 9% pa and if you receive

back the targeted 120p in the pound the return would be in the

region of 15%pa.

Seed EIS (SEIS)

This new relief broadly follows the rules for general EIS but

with a few notable differences:

- Maximum individual investment is £100,000;

- Tax relief of up to 50% of investment to the extent that

investor pays income tax;

- 50% of capital gains from other asset disposals arising

in 2013/14, which are reinvested in SEIS in either the 2013/14

or 2014/15 tax years, are permanently exempt from tax;

- Shareholder must not have more than 30% voting

shares;

- Maximum fund raising per SEIS is £150,000.

There are a number of ‘packaged’ SEIS offerings, primarily

involved in development work associated with things like smart

phone applications, film scripts and live entertainment events.

If original capital is preserved then these would represent a

very attractive investment. However, for most people, given

the current small investment limit, SEIS has limited application

other than for start-up businesses being funded by family and

friends.

HMRC has publicly suggested that it is highly likely that the

capital gains re-investment exemption will be extended to the

2013/14 tax year. If this does happen, together with a higher

overall investment limit, then more attractive opportunities are

likely and as a result take up of this tax shelter should increase.

Venture capital trusts (VCTs)

VCTs offer income tax relief for the tax year 2013/14 at 30% for

an investment of up to £200,000 in new shares, with relief being

restricted to the amount of tax otherwise payable. There is no

ability to defer CGT as with an EIS investment but dividends and

capital gains generated on amounts invested within the annual

subscription limit are tax-free. The shares have to be retained

for at least five years to avoid reclamation of the income tax

relief, making VCTs generally less attractive than EIS.

Business premises renovation allowance (BPRA)

Business premises renovation allowance (BPRA) is an income

tax relief given on qualifying expenditure associated with

the refurbishment of existing commercial property located

in certain areas of the UK and which has been empty for at

least one year. Areas include Northern Ireland, Birmingham,

Liverpool, north Cornwall, parts of South Wales, northern

Scotland and the north east.

BPRA is based on the old enterprise zone legislation, was first

introduced in April 2007 and was due to run until April 2011,

although the 2011 budget extended BPRA by a further five

years to April 2016. It has all the usual risks associated with

investment in commercial property including falls in value,

illiquidity, liability for business rates, tenant failure and cash

calls if borrowing covenants are breached.

Qualifying expenditure, which does not include the cost of the

land and building or any new building work, qualifies for 100%

relief to the extent of investors’ income tax liability. Investors

must retain their interest in the property for at least seven years

from practical completion to avoid a clawback of income tax

relief.

Take, for example, a £10m project where the existing building

costs £2m and the refurbishment work costs £8m. The £8m

would qualify for income tax relief but the £2m building cost

would not. This would be classed as an 80% qualifying project.

The inclusion of loan finance in the transaction, together with a

high percentage of qualifying expenditure, would make a BPRA

investment cash positive at outset as the following real example

illustrates:

Developer loan £67,000

Investor equity £33,000

Gross investment £100,000

Qualifying expenditure @ 80% = £80,000

Tax relief at 50% = £40,000

Net cost (benefit) to investor (£7,000)

BPRA is a highly specialised property investment which is

subject to complex rules so you should expect a few hurdles

before you receive any relief. That said, it is a non-aggressive

tax relief which is actively encouraged to generate economic

activity in disadvantaged areas. There have been a number of

BPRAs which offered attractive benefits from a range of uses

including car parks, hotels, and data centres, to name but a

few. If you pay income tax at 50% and you can find a decent

investment with a high qualifying expenditure amount and

favourable loan finance, it could be well worth considering.

Jason Butler is a Chartered Financial Planner and Investment

Manager at City based Bloomsbury. His bestselling book – The

Financial Times Guide to Wealth Management - is available

from Amazon and larger bookshops. Jason can be contacted

on email: [email protected]

Tel: 020 7965 4480.


As of the 31st December 2012, commission paid out on

investment and pension products was officially banned in the

UK, through the advent of the Retail Distribution Review (RDR).

This has meant that any new investment or pension advice has

had to be conducted on a fee basis only.

Coupled with this, the Financial Conduct Authority has put in

place a ban on ‘bundled’ rebates passing from fund managers

to third party providers due to come into force in 2016. This

will complete the circle with existing investments needing to be

moved to a clear and transparent fee basis.

The benefits of fee over commission was espoused for many

a month in the run up to the RDR implementation date. As

a result, the various fee structures and levels of fee that an

adviser can take have also been scrutinised. However, the

recent discussions I have had with new clients has highlighted

the lack of understanding as to how this fits in with the total

cost of ownership involved in a portfolio.

Fund Total Expense Ratio (TER)

When you buy units in a fund, you pass your money to a fund

manager who invests it in line with a set remit (for example, to

achieve capital growth through investing in companies that are

listed on the major UK stock exchanges.) In return for fulfilling

this remit (hopefully) the fund manager charges an Annual

Management Charge (AMC).

These fees can differ greatly depending on the approach of that

particular fund. Actively managed funds as a group have an

average TER of 1.66% (i) per annum (pa); however, these can

be as high as 5% (ii) pa. When you compare this to passive UK

equity funds which have TER’s as low as 0.15% pa, there is a

huge difference.

The higher the TER, the higher the hurdle a fund manager has

to clear before adding any value. When you factor in the weight

of evidence against stock picking and market timing, this can

mean that the TER may becomes a huge drag on performance.

Hidden Costs

Unfortunately the TER does not tell the whole story. There are

a number of hidden costs that can add up to an even higher

hurdle. These can include trading commissions and taxes, bid/

offer spread (the difference between buying and selling prices)

and market impact costs.

Various studies have been made into this opaque area. One of

the most reputable ‘The Price of Retail Investing in the UK’ (iii),

was published by the Financial Services Authority on the cost

of investing in the UK. They found that the round cost of buying

and selling a share in the UK could amount to 1.80%. Thus, if a

fund had a portfolio turnover of 100% (they effectively replaced

all holdings in their portfolio) it would add 1.80% to their TER.

More recently, a study was conducted that estimated active UK

equity funds incurred additional costs of 0.97% per annum (iv).

Even if we take the lower figure, this means the average UK

equity fund is likely to cost investors 2.63% per annum. This,

although a small number, can make a huge difference.

The graph below shows the power of compound returns and

the difference that a fee of 1% per annum, 2% per annum and

3% per annum can make on your overall return. As you can

see, for a £1 million portfolio over a 30 year period, a higher

fee percentage could make a significant difference in the final

portfolio value. Obviously, this doesn’t account for differences

in performance. However, it does show what a large hurdle the

cost of investing can be, and how small percentage figures can

make a huge difference in returns.

Assumed 6.5% annualised return over 30 years

Custodian Fees

A tendency that is gathering pace in the UK is the use of wrap

platforms and fund supermarkets as custodians by IFA’s,

wealth managers and financial planners. Using them can

bring a number of benefits such as reduced administration,

open architecture access to investments, online access and

How much do you pay for your portfolio?By Matthew Aitchison BA (Hons) APFS, Chartered Financial Planner


economies of scale. However, they do add a layer of charges.

The good news is that the economies of scale they can achieve

often offsets their charge. For example, often a large platform

can negotiate a saving of around 0.75% per annum on UK equity

funds in return for a charge of between 0.25% and 0.50% per

annum. However, it is worth considering any other charges that

a platform may levy such as transaction fees and report fees.

If you are using a good adviser, they should be looking at these

charges and balancing them against financial strength, efficient

administration and other such factors that are important when

choosing a custodian.

Wrapper Fees

An often overlooked cost is the fees involved with putting your

money into a tax efficient wrapper such as an ISA, investment

bond or pension. These have additional layers of charges,

however, should be kept to a minimum where possible. These

can be expressed as a fixed amount or a percentage. Where the

investments available are on an open architecture platform, the

wrapper becomes commoditised so should be kept as cheap as

possible.

Adviser Fee

Your adviser will levy a fee for advising you. This can range

from 0.50% per annum to 1.50% per annum. It is important to

understand what is included within your annual fee payment

to your adviser. For instance, where they recommend a change

to your portfolio, do your annual fees cover this or does your

adviser charge transaction fees to make the change? Are you

limited to a number of meetings? Do they include ongoing

financial planning in this figure? Do you get a structured

proactive service?

There are so many possibilities, both good value and poor

value that it is important to understand exactly what is and

isn’t covered within your adviser’s ongoing fee. Only then can

you make a judgement call as to whether or not you receive

value for money, whether you should pay a lower or higher

adviser fee.

Total Cost of Ownership

When you add all of these costs together, you establish your total

cost of ownership. To illustrate how this works, I have created

two fictitious clients each with a portfolio of £500,000. Client

A is invested in an actively managed portfolio with an adviser

who charges 0.5% per annum; whilst client B is invested in

a low cost passively managed portfolio with an adviser who

charges 1.0% per annum. Without looking into the total cost,

it may seem that client A is paying much less than client B.

However the figures tell a different story…

Client A Client B

Portfolio Size £500,000 £500,000

Funds TER 0.91% * 0.35%

Hidden Charges 0.97% 0.10%

Custodian Fees 0.30% 0.30%

Wrapper Charges £150 £150

Adviser Fee 0.50% 1.00%

Total Cost of Ownership £13,550 pa or 2.71% pa £8,900 pa

or 1.78% pa

* 1.66% reduced by 0.75% due to platform deals

At face value, without the above information, an investor may choose the adviser client A uses, as they charge half of client B’s adviser. However, even though client B pays his/her adviser a lot more than client A, client B pays an overall charge that is 0.93% lower than client A (equating to £4,650 lower). As the portfolio grows, this will result in a larger monetary difference over time.

Obviously, charges only tell part of the story. It is important to consider the other added value benefits that either client may be receiving from his/her adviser on an ongoing basis. Whatever your adviser charges you, whether it be 0.5% or 1.0% per annum, he or she should be adding value for their fee. However, by enjoying a lower charge, client B has a lower hurdle to surmount before experiencing positive gains and, in theory, achieving his/her goals.

The above example shows why it is so important to understand the total cost of a portfolio, not just the headline adviser charge. When reviewing a new or existing adviser, it is important to find out what value they will deliver for their, as well as what you are likely to pay (or are paying) for every aspect of your portfolio, not just focusing on comparing adviser charges. Your adviser should be able to give you details of all the above charges (hidden charges are more difficult to pin down). If they can’t provide these details, it may be time to appoint a new

adviser who can.

(i) Moisson E & Kreider J (2009), Fund Expenses: A

Transatlantic Study

(ii) Morningstar search conducted on 2 July 2013

(iii) James K (2005), The Price of Retail Investing in the UK

(iv) Miller A & Miller G (2012), Promoting Trust and

Transparency in the UK Investment Industry

Matthew Aitchison BA (Hons) APFS

Chartered Financial Planner

T: 01234 851 797 M: 07854 769 815

[email protected]

www.clearvisionfp.co.uk


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Investing in history: Why it pays to dig a little deeperBy Paul Fraser, founder of Paul Fraser Collectibles

For those looking to hedge their investments this year, the

2013 Knight Frank Luxury Investment Index makes compelling

reading. It reveals eight historical asset sectors that beat the

FTSE100 between 2002 and 2012.

1 Year 5 Year 10 Year

Classic Cars +23% +115% +395%

Coins +25% +93% +248%

Stamps +9% +72% +216%

Fine Art 0% +92% +199%

Fine Wine -19% +7% +166%

Jewellery +9% +77% +140%

Chinese Ceramics +0.4% +54% +85%

Watches +8% +27% +76%

Furniture -9% -12% -18%

Total: +6% +64% +175%

Source: Knight Frank

To put those numbers into perspective, the FTSE100 grew by

just 50% between 2002 and 2012, and actually fell by 9% in the

past five years during the global economic crisis.

“Where investments of passion really seem to show their value

is when mainstream investments are most vulnerable,” says

the report. “Over the past five years, which have included

the collapse of Lehman’s and the ensuing credit crunch and

economic slowdown, the index returned solid growth of 64%.

During the same period the value of [global] equities fell 6%.”

The figures appear to confirm a view that has been gathering

momentum of late: that the collectibles sector offers rich

pickings for investors. But caution is needed. I am a collectibles

dealer, and have been so for more than 35 years. But sweeping

figures such as the above can be misleading to the prospective

buyer, especially those new to the sector.

Those numbers suggest that when taken as a whole, the entire

stamps market has grown by 216% in the past 10 years. In fact,

the statistics only relate to 30 of the rarest Great Britain stamps.

What’s more, the figures quoted are for the finest examples of

those 30, as opposed to the less desirable offerings of the type,

which would tend to provide far less-attractive price rises.

A collectibles dealer saying “don’t buy collectibles”?

So what have we got here, a collectibles dealer saying “don’t

buy collectibles”? Not a bit of it. What I am saying is that it is


only at the highest echelons of the sector, among the rarest,

most desirable pieces, that you should be looking to buy for

portfolio diversification purposes.

This is a market that works on supply and demand. The more

scarce and desirable an item

is, the greater the potential

returns. Anything less than top

grade, and you will find that

the value-increases quoted

above will look a long way off.

This is why I continually stress

that the investment end of the

sector is only for the more

sophisticated buyers, who are

comfortably able to buy single

items for five figure sums.

Fun and profit?

It is important to differentiate

between an item that is a fun

collectible and one that is an

investment. The vast majority

of the collectibles sector is

“fun”. Yes, hugely enjoyable to

own and show off, but unlikely

to grow terrifically in value –

most likely because they’re

available in large numbers.

Examples include a 1960s

Triumph Spitfire (thousands

made and less mass appeal

than Ferraris or Jaguars), an

average state Penny Black

(over 68m were produced,

ensuring only the finest grade

examples are investment-

class) or a Picasso engraving (Picasso was prolific – meaning

his limited-edition engravings have sold for as little as £300 in

the past).

Yet there is nothing stopping investment-grade collectibles from

also being great fun to own – although the more valuable the

item, the less I find people are willing to pass it round at dinner

parties!

Market catalysts

So if you have the money and the desire to invest in collectibles,

there’s one question you should be asking: can the top end

of the market continue to rise in value? I believe it can. Past

performance is no guarantee of future gains, but the conditions

look right, with demand for the best pieces likely to grow over

the coming years. Why?

• The retirement of the wealthy

baby boomer generation is

seeing millions of people return

to their hobbies and find time

for new passions.

• The growing wealth of the

middle and affluent classes in

India and China – two countries

who love collectibles – will

impact the markets hugely over

the coming decades.

• And then there’s the growing

realisation around the world

that heritage assets offer terrific

diversification potential. And

more people will be seeking

such pieces, having learnt the

lessons of the economic crash

– diversification, diversification,

diversification!

The start of 2013 has shown

diversification to be more

important than ever, with gold

dipping sharply after a decade

of gains. And while the world’s

stock markets enjoyed a terrific

start to 2013, the long-term

prognosis is uncertain.

If you feel that rare collectibles

could be worth a place in your

portfolio, how do you start?

This checklist should help:

5 steps to successfully diversifying with collectibles

Quality: Buy the best you can afford. All things being equal,

the more you have to spend to secure an item, the rarer and

more desirable it will be. It is these pieces that have historically

shown the greatest price appreciation. Ferrari 250 GTOs (just

39 were built), Henry VIII signatures (privately owned examples

are extremely rare), and mission worn space suits are just three


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potential examples.

Value: Look to see what comparable pieces have sold for in the

past to ensure that your head stays firmly in control of your

heart when making an offer to a dealer or placing a bid at

auction.

Authenticity: Take every step to make sure the item is genuine.

Does it have a lengthy documented history, with a list of

previous owners? If buying from a dealer don’t be impressed

by a certificate of authenticity alone – it must be backed by a

lifetime moneyback guarantee, which ensures you get your

money back if it turns out to be a fake in the future.

Diversity: Just as every investment portfolio needs diversity, so

does your collectibles collection – values can go down as well

as up, as tastes change and “unique” pieces are discovered to

no longer be quite so singular. Widen your interests and your

portfolio will be the better for it.

Expertise: The most important point of all. If you don’t have

it, speak to someone who does. Or better still, two or three.

While the previous four points will help you make an educated

decision, there is nothing like having the comforting expertise

of a professional in your corner. Dealers and auctioneers are

first and foremost enthusiasts, who are happy to assist. Use

them. At Paul Fraser Collectibles we have the world’s largest

stockholding of collectibles and would be delighted to help.

Paul Fraser

Founder of Paul Fraser Collectibles

www.paulfrasercollectibles.com

[email protected]

+44 (0)117 933 9500


During any period of ongoing economic uncertainty, one could reasonably expect the capital value of property, like many other assets, to depreciate. However, despite the catalogue of recent domestic and international economic issues that could easily have prompted a crisis within the property market, prices in London are now above their pre-recession levels and many of the dire predictions made by property commentators have so far proven to be wide of the mark.

The improved market conditions witnessed this year have been the result of a number of factors which have contributed positively to buyer/seller sentiment, not least the improved affordability and accessibility of mortgage finance, an economy which is showing definite signs of recovery and a number of government initiatives aimed at stimulating the property market.

Signs of recovery vary between regions, with the London and the south of England seeing the most improvements whilst the north of England continues to struggle. Average prices across the country climbed 3.1% in the year to June, while in London prices have risen 6.9% with sales of £1m plus houses up by 31% in the year ending June 2013.

London prices continue to act almost as a law unto themselves, with capital growth of Prime Central London properties last year comfortably outpacing that of other major assets, delivering better long-term growth than equities and gilts and proving less volatile than oil and gold.

It is for this reason that the London property market is increasingly seen as an international financial safe haven and attracts an enormous amount of investor interest, both domestic and overseas, meaning that competition between buyers for the few available properties is fierce and prices are continually being driven upwards, much to the delight of savvy investors that have already invested.

Interestingly, the Chinese, Russian and Middle Eastern investors which have long been active in central London are now being joined by investors from countries including South Africa, Turkey, Kazakhstan and Azerbaijan, which are expected to become an increasingly active and influential force in London’s real estate market. The buy-to-let investment market has also experienced a boost over the past year, thanks in main to the increased availability and affordability of specialist buy-to-let mortgages, which can now be secured from 2.5%. Although average rental growth has slowed over recent months after a number of years of impressive growth, rental investments are generally still providing landlords with a good, reliable return that beats the meagre interest paid by banks and building societies on savings.

Buy-to-let investors have also benefitted from the large number of ‘trapped’ renters – people that, despite government schemes designed to help people on to the property ladder, are struggling to secure a mortgage and/or accumulate an adequate amount of deposit monies and are finding themselves increasingly priced out of the market and forced to rent. This situation caused, as Homelet recently reported, average rents to increase by 3% to £811 per month during June, their highest ever level. The same report also noted that void periods have also dropped significantly as renters are eager to secure a rental and also opt for longer rental periods.

Another investment class outperforming many other assets and attracting a wide range of international and domestic investors is farmland. As with the residential market, this sector is suffering from a chronic shortage of available or viable stock, a fact which has been pushing values steadily up. Average farmland values are now at a record £8,520/acre, up from £7,069/acre in 2007.

Looking forward, Chesterton Humberts’ Head of Research, Nick Barnes, is anticipating that next year will see a continuation of the growth enjoyed this year. He commented, “As the funding for lending scheme continues into next year and the government seeks to increase its popularity amongst the electorate in the run-up to the 2015 election by not making any sudden moves, national average house prices should continue their modest upwards trend. Property in central London will, for the foreseeable future, be a safe investment, but with such strong competition for well located and good quality stock driving prices, the ability to secure a ‘deal’ will become nigh on impossible.”

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*Chesterton Humberts Mid-year Forecast, June 2013


The first rule of public speaking is that you should never

embarrass or insult your audience. The same applies to

articles in learned journals. On the other hand, it is great fun.

When I give a talk to a business club, I usually throw in the

occasional “ask the audience” question. Something like “hands

up everybody who has reviewed their will in the last five years”.

If you are lucky, about one third will respond. I then try “hands

up if you have ever made a will”, which usually leaves about

10% of the audience looking sheepishly at the floor. I have

often tried the same routine with an audience of lawyers, which

hilariously throws up at least one who admits to having no will

and a number of others too embarrassed to admit it. We all

know they should have an up to date will, but somehow it gets

overlooked in the busy lives we all lead.

I deal with barristers on a regular basis, either as tax counsel

or in litigation work, where I act as an expert witness. Without

wishing to ingratiate myself with this readership, I recognise

that barristers are, almost by definition, very bright people who

can apply themselves to enormous detail in the matters at hand.

So why is it that that so many barristers seem to display wholly

different tendencies in running their own financial affairs?

Apart from the obvious need for a will, it seems to me that

it is the duty of all of us to make life easy for those we leave

behind, particularly our executors. The problem with being an

executor is that the person you would most like to consult when

you are tidying up an estate has inconveniently just died.

When you ask someone to be your executor, it is often regarded

as rather an honour, a bit like asking someone to be your best

man at your wedding. The duties, however, are considerably

more onerous. I favour the creation and regular update of a

Dying Tidily Log. This should be a few sheets of paper on which

you write all the information that your executors will need to

know after you are dead. Apart from the location of the will

(recently updated of course), you should record information

about your property, investments, insurance policies, bank

accounts, debts and anything else they will need to apply for

probate.

Do not forget any gifts that you have made in the last seven

years in excess of the £3,000 a year annual allowance. If you

intend to rely on inheritance tax (IHT) relief for regular gifts out

of income, you need to record not just the gifts but also leave

details of your income and expenditure over the previous seven

years. I did this for my own mother for the last five years of

her life when she kindly agreed to assist with the school fees for

her assorted grandchildren and, by keeping detailed records of

the amount of her excess income, I had no difficulty persuading

the capital taxes office that over £100,000 of her gifts escaped

IHT. Having made a Dying Tidily Log, make sure you tell your

nearest and dearest, and your executors, where you have filed

it, and make sure you know where the key is if you have it

locked away in a safe, and how to find the safe of course.

HM Revenue & Customs (HMRC) is becoming particularly tough

over deceased estates, where it seems to think that a number of

valuable assets go ‘missing’ sometime between the death and

the executor turning up to find them. A particular giveaway

is the clean patch on the sitting room wall where the family

heirloom used to hang.

At a rather more basic level, we still come across barristers

who overlook some of the most basic issues of financial

recording (there I go insulting the audience again). Anyone

starting a business should operate through a business bank

account. That way you can record all your fee income and

business expenditure as a check on the records you have in

your bookkeeping system. It sounds obvious, but failure to

keep proper books and records is asking for trouble with the tax

office, who are taking a particular interest in professionals at the

moment, including barristers. If you want evidence of that, you

only have to look at recent cases where HMRC has successfully

Ensure your finances are in orderBy Mike Warburton, Director, at leading business and financial advisors Grant Thornton UK LLP.


prosecuted a couple of barristers for failing to account for

VAT correctly. It is a particularly effective way of ruining your

career. It is not just because HMRC believes it can recover

over £3 million from the legal sector, but because it rightly

believes that professionals should set a high standard. HMRC

is planning a five-fold increase in prosecutions of professionals,

which it believes would strongly encourage others to pay their

‘fair share’. It also plays well politically to show that nobody is

above the law. After all, MPs received their own grilling a few

years ago over their expense claims. If MPs’ expenses were

deemed to be too generous, perhaps lawyers have been getting

away with it as well. Having said that, however, it is important

that you claim all the expenses to which you are legally entitled.

In general terms allowable expenses fall within HMRC’s ‘wholly

and exclusively’ principles. Deductible expenses include (certain)

clothing and cleaning, chambers costs, business only telephone,

legal literature, clerking, general admin such as stationery and

postage, motor expenses plus travel and subsistence (excluding

home to chambers), use of home as office, professional

subscriptions, indemnity insurance, accountancy, course and

seminars, business loan interest and capital allowances on

motor vehicles and law libraries. This is not suggested to be

an exhaustive list but may represent a helpful checklist. Keep

comprehensive records and documents to support claims as

HMRC is taking a keen interest.

Finally, for those of you who are married, one of the best

investments you can make is in your spouse. I am not just

here talking about the benefits of marital harmony but, from

a financial point of view. Although most barristers will have

administrative tasks looked after in Chambers by the clerks,

there is usually scope to employ your spouse to look after the

various other business issues that crop up, which may include

secretarial duties when you are working from home. This can

lead to an opportunity to provide not just a salary for your

spouse, but also a pension. The tax rules on pensions can be

very generous. Even if there are minimal earnings, you can use

the £3,600 allowance.

This brings me round to my final words of wisdom. Despite all

the stresses and strains we live under, we are living longer, well

most of us are anyway. One thing we can be sure of is that the

state will not be in a position to provide a decent pension for

us in our old age and we need to sort out our own retirement

planning. There is a simple rule on this, if you do not have a

pension plan, start today.

Reading through this again , I have decided that I rather like

the first paragraph, which beats “some of my best friends are

lawyers”, even though that happens to be true.

Author

Mike Warburton, Director,Tax at leading business and financial

advisors Grant Thornton UK LLP.

Hartwell House | 55-61 Victoria Street | Bristol | BS1 6FT

T (direct) +44 (0)117 305 7819 | M +44 (0)7970 673 612

E [email protected] | W www.grant-thornton.co.uk


As financial advisers working with clients who do not have a

financial background (including many lawyers), we can identify

a number of common beliefs about personal investing that they

appear, judging by their previous actions, to have treated as

reliable or certain. Chief among the implied beliefs that do not

hold up under questioning are:

1. Property is a better investment than financial assets

2. In a changing world, my risk tolerance should also change

3. Holding fixed-income investments reduces my risk

4. I can ‘do it myself’ – or if I cannot I know how to select who

should.

Home truths about ‘bricks and mortar’

Lacking financial training, we are likely to have a ‘familiarity’

bias to property as an investment and to believe that, in our

own experience, property has beaten financial assets like

equities. This assumes we know how to account for the true

return on our own property investment and that we know what

the comparable data is for equity investing. Rarely are both

true.

From a theoretical point of view, we might all agree that it is

unlikely that the long-term real returns (after inflation) from

business and housing will diverge significantly, because both

are connected via employment incomes and affordability. This

is supported by data for indices of equity markets and house

prices. When income returns are ignored (as property rent,

broadly equivalent to business dividends, is being consumed

or spent when we live in our own property) and adjustment is

made for general inflation, the long-term trend in UK real house

prices, as measured by the Nationwide index, and the capital

return on the FTSE All Share Index have both been about 2%

pa for the last half-century.

Even this flatters the performance of property, as the dividend

element of the equity return is after retaining sufficient capital

for investment to sustain the life of each firm, otherwise each

dividend-paying company would be a wasting asset (which,

after the event, we can see only some were). Rarely do we

calculate our own property returns adjusted for the new capital

investment we have made, not only to achieve improvements

but simply to maintain the standard of the property at the

‘market’ level implicit in the house-price indices.

Where we have made out in the past is by borrowing, in which

case we ought not to compare the growth in our ‘net equity’

with the market return, without borrowing, from equities.

Borrowing only makes us richer if the assets acquired rise in

value by more than the cost of borrowing. Earlier generations

of home owners were enriched by negative real interest rates in

a time of high inflation, not by a property boom.

The loser’s game

What reasonable person would not vary their willingness to

bear risk with the changing state of the economic environment?

Seeing the state of the UK or world economy deteriorate and

risk increase, why not reduce exposure to risk, and vice versa

as conditions improve? Reasonable it may be but it does not

usually have the desired effects.

It was the veteran American investment adviser, Charlie Ellis,

who in 1975 first adopted some contemporary observations

from a book about tennis to make his point that individuals

play the stock market like amateurs play tennis. They play as

if they can win every point, in other words as if they are more

skilled than is really the case. Instead of beating their opponent,

they beat themselves. Top professional tennis players, however,

recognise the limit to their skill and wait patiently for, or to

create, the small advantage that offers a point, all the time

minimising their own unforced errors.

Changing investment positions as a reaction to our view of the

changing world we live in (and invest in) is a form of ‘market

timing’ and is the equivalent of treating the opposition (other

investors) as amateur and imagining we are the pro. The

market already reflects the actions of others based on their

beliefs about what is happening in the ‘real world’ so successful

investment requires a reaction to the market rather than to our

own changing views of the world. What results from that insight,

equivalent to the long, testing rallies of the tennis winner, is

a ‘contrarian’ approach to both markets and sentiment. I see

this as maintaining a constant risk tolerance while other people

change theirs: I change my levels of risk but not my attitude to

risk.

Taking the long view and acting as a contrarian relative to other

players is a way to win the equity game. But this is because

the belief implied by this way of investing is that real returns

provided by equity indices are a measure, or reflection, of the

capitalist system at work. It is a system because collectively

business is adaptive: it changes in response to economic or

Implied beliefs in personal investingBy Stuart Fowler, Director, Fowler Drew Limited


political stresses in ways designed to ensure its survival. Whilst

not all individual businesses survive change, an index is by

design Darwinian, dropping losers and picking up winners.

Lacking confidence but needing to hang your investment

decisions on some set of beliefs, to back the equity return

system is like Pascal’s wager because if it is proved wrong all

other investments will be doomed too.

The bond fallacy

Except for index linked bonds, with guaranteed inflation

protection, fixed-income bonds are ‘nominal’ contracts whose

future real value depends on what happens to inflation. There is

no ‘natural’ or ‘typical’ rate of change in prices in the economy

comparable with the systematic trend of real returns from

equities.

Up to the 1950s, deflationary episodes were as common as

inflationary ones. From the 1950s to 1980s, an upward trend

took hold, with increasing volatility. This saw the purchasing

power of fixed income streams (bonds, annuities, nominally-

fixed pensions) eroded dramatically to the point, for many

investors, of real hardship.

Nearly a quarter of a century later, memories are selective.

People remember the gains in capital values provided by the

Great Moderation in inflation and overlook the confiscation

and transfers of wealth that inflation wrought previously. Most

private investors hold bonds in their portfolios. Indeed they are

the investment industry’s main means of differentiating portfolio

risk in a portfolio, because their short-term volatility is lower

than equities and they may also move in opposite directions.

There are in fact two core building blocks that are sufficient for

any private-client portfolio: equities and index linked gilts. The

latter offer certain real returns at certain future dates so are

the natural ‘risk free’ asset for individuals. Adding index linked

gilts to equities is the most reliable, quantifiable way to reduce

the risk inherent in uncertain future real values for equities and

to keep portfolio wealth outcomes within tolerable levels.

The agency selection problem

Who to turn to, when the experts appear just as likely to double

fault or smash the ball out of an empty court – and charge you

heavily for the privilege of watching them play the Loser’s Game

for you?

Taking a ‘lifetime’ view of the need for advice and investment

management, there are a few life stages at which planning,

helped by experts, is useful but then only if it is accompanied

by education that will better inform your future actions. During

‘accumulation’, once earlier priorities like family raising and

property enjoyment have been satisfied, a well-informed

and constant DIY approach is likely to be superior to most

professional portfolio-management services. ‘Well-informed’

means getting clear about what risks to bear or embrace and

what risks to avoid; ensuring enough risk is taken; constantly

acting consistent with a sensible view of the way the financial

world works. This is what good financial planning at an early

stage of your earnings career should equip you with.

It is as retirement approaches, and risks take on different

forms, that you are again likely to need new and more granular

planning. At that stage, finding a good money manager is

both more important and much harder. This is because few

managers of private wealth know (or care) how to adapt their

portfolio solutions to the complexities of ‘drawdown’ or living

off capital. Planning will reveal each of: idiosyncratic rates of

draw, derived from after-tax spending targets and with entirely

personal profiles at different stages of retirement; competing

welfare, such as between clients’ own spending and helping

children and grandchildren; wide ranges of time horizons

implied by drawing on capital from as little as 10 years to as

many as 50 years out. These client-specific planning outcomes

are technically challenging for portfolio managers and imply

high cost and lower profit compared with their standardised

products and services.

Lacking expertise to select advisers and money managers,

individuals tend to rely on ‘proxies’ such as personal chemistry,

past performance, reputation and brand. The implied belief

is that professionals are skilled: they know how to play to

win. Experience suggests otherwise: they are also caught out

by a lack of respect for the randomness and unpredictability

of markets. Disappointment is far less likely when selection

is based not on proxies but the evidence they can see of the

adviser’s humility, of services clearly customised to the client’s

own needs and of ways of charging that more obviously align

their interests with their clients.

Stuart Fowler

Director

Fowler Drew Limited

22 Quayside, William Morris Way, London SW6 2UZ

+44 (0) 207 736 2434

www.fowlerdrew.co.uk

Authorised & Regulated by the Financial Conduct Authority No

402423


Back in 2006, the introduction of the lifetime allowance ‘cap’

on pension savings brought consternation to many in the legal

profession. From next April the cap is set to fall and will be

lower than the original £1.5M figure set in 2006. The good

news is that there is still a window of opportunity to plan for its

introduction.

It could be you

The pension lifetime allowance (LTA) will be reduced for the

second time in two years to £1.25M. This is the maximum

amount of pension savings that can be built up without tax

penalties. The combined tax charges on savings above this will

be 55% whether taken as a lump sum or as income for a higher

rate taxpayer. It’s worth noting, however, that State pensions

and non-registered pension schemes (such as certain elements

of the Judicial Pension Scheme) don’t count towards this limit.

There is the realistic possibility that the LTA will be frozen for

the foreseeable future – and might even be cut again.

HMRC estimate that 30,000 people will be immediately affected

by next year’s LTA cut, with 360,000 expected to break this

limit over the longer term. This takes the impact of the LTA way

beyond the 1% envisaged when it was introduced.

A £1.25M limit may not set alarm bells off with you just yet.

But, with a frozen allowance a distinct possibility for those

within sight of retirement, you don’t have to be close to £1.25M

now for it to become a problem. Investment growth can quickly

accelerate pot size.

This table shows the current pension pot that could grow to

£1.25M over various terms to retirement based on different

growth rates (and assume no further contributions are made):

Years to go/ growth 3% 7% 9%

3 £1,170,000 £1,050,000 £994,000

5 £1,130.000 £936,000 £854,000

10 £1,020,000 £702,000 £583,000

Figures have been rounded to the nearer £1,000

An allowance for costs of 1% has been made.

So someone 10 years from retirement with a current pension

pot of £700,000 could exceed their allowance if their pot grows

at 7% a year – even if they stop paying into it now.

Protection 2014 – locking into a higher lifetime allowance

So what can be done about it?

There are two new protection options for 2014, allowing those

affected to lock-into a higher LTA – ‘fixed protection 2014’ and

‘individual protection’.

Fixed protection 2014 mirrors the earlier fixed protection

2012 when the LTA was cut from £1.8M to £1.5M. The latest

version allows people to keep a £1.5M LTA beyond 2014. This

is available to anyone who doesn’t have any of the earlier forms

of protection (enhanced, primary or fixed protection 2012).

But there’s a trade-off: pension contributions have to stop after

5 April 2014. And HMRC must have received the application

for fixed protection by then.

Individual protection is only available if pension savings exceed

£1.25M on 5 April 2014. This will give a personal LTA equal to

the benefit value on 5 April 2014 (up to a maximum of £1.5M).

So someone with pension savings worth £1.36M on 5 April

2014 can lock-into a personal lifetime allowance of £1.36M.

But someone with savings worth £1.55M would only secure a

£1.5M allowance.

Crucially, this protection comes without the trade-off needed for

fixed protection. Individual protection allows you to continue

funding your pension after April 2014 if you want to (or, perhaps,

continue to enjoy pension funding from an employer). So, for

those already above £1.5M by April, individual protection gives

Pension lifetime allowance cut – ‘it could be you…’By Dave Downie, Technical Manager, Standard Life


a better deal than fixed – a £1.5M LTA with no requirement to

give up on future pension saving.

• There’s no downside to registering for individual

protection, so anyone eligible should do it. You’ll get an

increased LTA with no trade-off.

• And it can be registered alongside fixed protection

2014 or 2012. This gives a safety net to fall back on if fixed

protection is lost.

• HMRC is still consulting over whether individual

protection should also be available as a safety net alongside

enhanced protection. It definitely won’t be available to those

who elected for primary protection back in 2006.

It’s expected that applications for individual protection will be

allowed until 5 April 2017. This is to allow time to ascertain the

benefit values at 5 April 2014 needed to establish the personal

LTA.

Here’s a high level summary of the two new protection options:

Fixed protection 2014 v Individual protection

LTA of £1.5M Personal LTA based on

benefit value at 5 April 2014

(or £1.5M if lower)

No ‘benefit accrual’ after 5

April 2014

Further contributions/ DB

accrual allowed

Must apply by 5 April 2014 Applications open to 5 April

2017

Can’t have with primary,

enhanced or fixed protection

2012

Can’t have with primary

protection

Consultation over holding

alongside enhanced

protection

Can have alongside

individual protection

Can have with fixed

protection 2012 or 2014

These new options are very welcome. But they take us a long

way from the 2006 vision of a ‘simplified’ pension framework.

As well as the standard regime, we’ll now have 5 different

protection regimes - enhanced, primary, fixed 2012, fixed 2014

and individual protection! Not to mention protected lump sums

above 25% and protected low pension ages. It’s a legislative

and planning minefield that requires careful consideration to

navigate through.

Getting this wrong could potentially expose up to £250,000

of your pension savings to a needless 55% tax charge. That’s

137,500 reasons to seek professional advice and avoid sleep-

walking into a tax charge. It isn’t an easy decision and the clock

is ticking…

Decision time

The allowance cut raises some difficult questions. And those

affected have some big decisions to make before April:

Should I elect for protection?

The biggest, strictly time-bound, decision is whether to register

for protection or not. And, if so, which one is right for me?

• Fixed protection means giving up on further pension

funding.

• Individual protection gives a higher allowance and

the ability to carry on funding, but leaves the possibility of tax

charges on future growth.

An alternative for those considering retirement soon is to take

benefits this tax year, even if this wasn’t your original intention.

But you might also be best advised to register for protection

too (for example, to protect against any LTA at age 75 under

drawdown).

Top-up pensions this tax year?

The current tax year is the last opportunity for anyone opting

for fixed protection to make a final top-up payment to their

pension before the shutters come down in April.

If you are close to retirement you might want to top-up your pot

to take it over the £1.25M threshold that triggers eligibility for

individual protection.

Employer compensation?

Protection might mean giving up on future pension saving –

either to safeguard fixed protection or minimise tax charges


under individual protection. But, for those who are employed

rather than self-employed, what if it also means giving up on

‘free money’ in the form of employer contributions?

Will your employer offer alternative remuneration in place of

the pension contribution? If so, is it sufficient to outweigh the

potential tax charge from staying in their pension scheme?

This complicates the equation further. But it’s important to pin

it down.

Review investments?

The lower LTA can change the investment risk v reward

equation. You will only benefit from 45% of any investment

growth above the LTA, but yet will still suffer 100% of any loss.

This imbalance could be the trigger to review your investments

within your pension, switching out of riskier funds aimed at

providing capital growth for a portfolio that offers greater

protection against stock market volatility.

Consolidate legacy pensions?

Regularly reviewing progress of pension pots towards the

reduced allowance will become increasingly important in the

post-2014 world. This is easier if all the pensions are held in

one place.

This raises the question of whether to transfer your existing

pensions all into a single scheme. And this can bring other

benefits too – economies of scale, wider investment choice and

benefit flexibility. But make sure you aren’t giving up valuable

guarantees. There is also no guarantee that you would be better

off combining existing pensions.

Where to save after April?

If you are forced to give up funding your pension, you still have

to save your surplus income somewhere. There is a wide choice

of other investments, and tax wrappers, available.

ISAs and offshore bonds both enjoy the same freedom from tax

on their investment growth within the fund as your pension

fund benefits from. While unit trusts and OEICs offer an

opportunity to make use of your CGT exemption each year to

mitigate tax. And not forgetting that you could be funding a

pension for another family member who will receive tax relief

on your contributions.

Having a range of different investments, each with different

benefits and tax treatment, can allow greater scope for tax

planning when it comes time to enjoy your retirement. It can

offer flexibility around your retirement income strategy and

also when you come to consider how to pass on your wealth to

future generations.

Time to act

There’s a lot to think about. And April 2014 is fast approaching.

So it’s best not to leave it too late and risk unwanted tax charges.

For more information speak to your financial adviser or

Standard Life on 0800 970 4165

The value of an investment can fall as well as rise, and may be

worth less than invested. Laws and tax rules may change in the

future and the information here is based on our understanding

in August 2013. Personal circumstances also have an impact on

tax treatment.

Calls may be monitored and/or recorded to protect both you

and us and help with our training. Call charges will vary.


Inertia works (sort of)A line-up of glitzy business celebrities have signed up to promoting the government’s new pension initiative, but many legal professionals may get left behind.

By Laith Khalaf, Head of Corporate Research, Hargreaves Lansdown

Theo Paphitis and Karren Brady have led the campaign,

appearing on posters and television commercials, declaring

‘I’m in.’ But the reality is the new pension rules will still leave

large swathes of the population un-pensioned, including the

self-employed.

The government has recognised for some time that we have a

problem: millions of people are not saving enough for retirement.

This is going to cause huge problems as waves of babyboomers

hit retirement with long life expectancies that could hardly be

imagined when they were born. The government has already

taken some steps to deal with this by increasing the age at

which you get your state pension and making it less generous

for many.

However, the government also know that they need to get people

saving if they are to avoid huge numbers of people retiring in

poverty. To this end they have introduced a programme called

‘Automatic Enrolment’. The premise of this initiative is to

harness the power of people’s inertia towards their pension.

Employers will need to automatically enrol their staff into a

pension scheme, and pay into it. People can opt out if they wish,

but the idea is they won’t be bothered to do this.

This process started in October 2012 with the very biggest

employers and is gradually working its way down to the very

smallest. While it is still early days, the programme appears

to be meeting with some success. Only around 10% of people

have opted out of their new pension, so it looks like harnessing

inertia works. For those who have an employer who enrols

them and pays into a pension for them, this is a very positive

step forward. The deal is that the employer has to pay 3% of

salary into a pension, whereas the employee pays 4% in, with

a further 1% coming from the government in the form of tax

relief (higher rate taxpayers actually get a further 1% in tax

relief too).

While this is a vast improvement on the situation we have now,

where half the working population are not making any pension

savings whatsoever, we should bear in mind that it is not a

silver bullet. An 8% contribution will only go part of the way

to providing a comfortable retirement, even if you start saving

at age 22. Someone earning £50,000 could expect a pension of

around £4,000 per annum if they saved all their working life

with an 8% contribution. That drop in income suggests a rather

hefty fall in living standards.

Understandably a fairly natural reaction to statistics like this

is to hold your head between your knees in despair. This

actually is part of the problem which automatic enrolment will

hopefully eventually address: our savings culture is far behind

the curve in adjusting to the increase in life expectancy that has

been observed, and indeed which keeps rising. Yet another

frightening statistic: one third of all children born in 2012 can

be expected to live to 100, according to the Office for National

Statistics.

This rise in life expectancy has a direct impact on how much we

need to save. A 65 year old man with average life expectancy

can now expect to spend 1 year in retirement for each 2 years

he has spent working. In very crude terms to support himself

he therefore needs to save £1 for retirement for each £3 that

he earns, in other words a 33% pension contribution. The

crudeness of this example illustrates the point, but before you

fall off your chair it does ignore some subtleties which actually

make things look a bit better for us.

In particular we can expect a state pension, which we pay for

notionally through National Insurance Contributions. However

this a bit of an unreliable beast to say the least, because politicians

have a habit of moving the goalposts, and changing the game.

State Pension Age is in the process of rising to 67, and is likely

to hit 70 in the not too distant future. We can however expect

something from the state to help us in retirement (probably).

The fact that we invest the money we save also means we don’t

have to save as much as £1 today to get £1 back tomorrow.

How much exactly we need to put away depends how early we

start saving: if I want £1 back in 2050 I can put away lot less


than if I want it back next year. The combination of these two

tailwinds means that as a rule of thumb we each need to save

around 15% of earnings throughout our working life to be able

to retire comfortably. The 8% contribution required by auto-

enrolment goes some way towards this target, but there is still

considerable slack to be taken up.

What’s more, for some people auto-enrolment won’t even

improve their lot up to this modest level. The self-employed

are the most obvious group. With no employer to automatically

enrol them, they fall completely under the radar. It will still

be possible for a self-employed individual to go through their

entire working life without saving a bean for retirement, or

have anyone make savings on their behalf.

To make matters a bit more complicated here, the definition

of self-employment used for automatic enrolment is slightly

different to the taxman’s definition. So in some cases even if

HMRC would judge you to be self-employed, you may count as

employed under pensions legislation. Much of this comes down

to whether the individual has a contract of services or a contract

for services. Anyone who has a contractual relationship of this

nature should check their status with the organisation they

have that contract with.

If you find that you don’t qualify for an employer pension

contribution because you fall into the self-employed camp, you

can of course set up an individual pension of your own. While

you won’t benefit from an employer contribution in this scenario,

you will still qualify for tax relief from the government to boost

your savings. There are a number of individual pensions out

there. These range from a Stakeholder Pension, which offers

you a fairly limited number of funds, all the way through to a

SIPP (Self Invested Personal Pension), which allows you freedom

to invest where you want, in funds, in shares, in trackers and

ETFs, or in bonds. SIPPs have become very popular in recent

years as people who are saving tend to want to make the most

of their money. Crucially, the generous tax breaks are the same

whichever pension you choose to save into.

The alternative to saving for retirement is not particularly

appealing. If you hit State Pension Age with nothing to your

name, you can expect around £7,500 a year from the state.

That amounts to about £145 a week- not a great deal by any

stretch of the imagination. That is why the automatic enrolment

programme is a positive and necessary step. But it will leave

many behind, and for those it encompasses it will be only a

partial solution. Some of this can be addressed by policymakers

increasing the required contribution up from 8%. Many view

this as an inevitable next step. If we look across to Australia

who introduced a similar system 20 years ago, employer

contributions started off at 3% of salary like here, but are set to

rise to 12% by 2019. Clearly it will take us quite some time to get

there, and in the meantime a generation could fall through the

cracks and hit retirement with very little to their name. Those

who accumulate a decent savings pot will almost certainly be

those who had to do it themselves. Harnessing inertia can work,

but it can only take us so far.

Laith Khalaf

Head of Corporate Research

Hargreaves Lansdown

0117 980 9866

0797 757 0820


HOME INSURANCE ENHANCED

With 90 years’ experience insuring homes, we understand that some cover needs to be as unique as the lifestyle and possessions it protects; from golf buggies to antique jewellery.

That’s why we’ve partnered with Aqueduct Underwriting Limited to create Home Insurance Enhanced – bespoke high value protection that’s defined by you.

Enhanced covers homes that would cost over £800,000 to rebuild and require higher levels of content cover with valuables totalling more than £80,000. It also provides specialist cover for things like fine art, antiques and jewellery.

Home Insurance Enhanced is arranged and administered by Aqueduct Underwriting Limited – underwritten by a panel oftrusted insurers.

BECAUSE YOU KNOW YOURST ANDREWSFROM YOURCARNOUSTIE.

GET £100 M&S VOUCHERSWHEN YOU BUY A POLICY BY 31 DECEMBER 2013.CALL NOW FOR A TAILOR MADE QUOTE.0800 072 5056 quoting e646Calls may be recorded and monitored. Call charges will vary. Lines are open 9.30am to 5.30pm Monday to Friday.Terms and conditions apply. See below for details.

Terms and conditions: You’ll receive £100 M&S vouchers if you buy a new Enhanced policy by 31 December 2013. You’ll receive your vouchers 75 days after your policy has started, if your premiums are up to date and your policy is still active. We may withdraw this offer at any time. Existing and previous home insurance customers who have held a policy with us in the last six months, staff and shareholders of Legal & General are not eligible. Not to be used in conjunction with other offers. No cash or other alternatives available.

Legal & General Distribution Services Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales number 8083925. Registered Offi ce: One Coleman Street, London EC2R 5AA.

09/13 A001628

50740.05_LG_GI_MNW Press_Col_BarristerMag_297x210_v11.indd 1 02/09/2013 10:37

Why use a highly qualified, Independent Financial Planner?

After all, aren’t they all the same?

Well, to a point, Lord Copper, as they say.

Let’s be clear about this. Money is actually just another tool at your disposal, in the same way as your health and education are, in order to achieve your life’s goals. The reality is that the complexities surrounding money can sometimes become a stumbling block rather than an enabler.

Unless we know how much money we need to achieve life’s goals and comfortably secure our future, you may always live with the fear you may not achieve your goals.

Many clients ask themselves the following questions:

1. Do I yet have enough money to retire, or work as I choose? If not, when will that point occur?

2. If I had died today, would I have left the legacy and support for those around me that I would like to?

3. Am I getting clear, unbiased, Independent advice about my money?

We provide clear advice to make those dreams a reality through Independent, fee only Financial Planning coupled with a transparent approach to Investment Management based on Nobel prize winning research.

Our aim is to cut through the complexity of the investment world to allow our clients to feel secure about their future and to feel comfortable in their relationship with us. We pride ourselves that a client’s voice is their security code, not a number.

We have been awarded both the prestigious Chartered Financial Planner as well as the Accredited Financial Planning firm designation. At the beginning of 2013 less than 3% of UK firms held these awards.

As an independent, fee-based Financial Planning firm, trust and professionalism is at the heart of who we are.

Perhaps this passion for professionalism is why we have attracted so many other professionals as clients. They recognise and appreciate the process.

But talk is cheap. To see if we can ‘Walk the Walk’, contact us on 0845 123 3889 or [email protected] for an initial no obligation discussion at our expense. We will even provide the coffee!

Documents

Financial supplement 2013