Guide to Start Your Year - Issue 3

Guide to Start Your Year - Issue 3

issue 3

Guide to Start Your Year

TIME Investments

Intergenerational financial planning - keeping it in

the family J page 15

Schroders

Oh no, not another survey… but can research help with my 2021 business plan? J page 17

Invesco

An economists perspective on 2021 J page 23

You know your clients. And we know investing.

Morningstar ® Managed Portfolios TM Available only through advisers like you, Morningstar ® Managed Portfolios TM are designed, built and monitored by our experienced investment team. We offer a range of passive, active, real return, income, ESG, and International portfolios. All portfolios are built for the long term and managed with a keen eye on risk. Our managed portfolio services can help enhance your investment offerings, strengthen client relationships and streamline your business. Together, we bring your clients the best of both worlds: A financial plan you’ve developed specifically for their needs that includes all of the advantages of professional portfolio management. We’ll allocate the assets, so you can spend more time with your clients.

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For more information: Call 0203 107 2930 Email [email protected] Visit www.morningstarportfolios.co.uk

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55–71 City Road London EC1Y 1HQ

Past performance is not a guide to future returns.

©2020 Morningstar. All Rights Reserved. Morningstar Investment Management Europe is the entity providing the discretionary management services and is authorised and regulated by the Financial Conduct Authority. Morningstar Managed Portfolios are intended for citizens or legal residents of the United Kingdom. These portfolios can only be made available through the use of an investment adviser appropriately authorised and regulated by the Financial Conduct Authority.

Guide to Start Your Year - Issue 3 | 3

Editor’s Forew0rd

Looking forward to Tenet’s Events 2021!

Our 2021 events programme will begin in February, with a series of online events. We plan to return to face-to-face events in May 2021 and will continue to monitor the situation as it unfolds. During 2020 we moved over 80 events to an online format and have continued to adapt these online events throughout the year based on your feedback. We very much look forward to seeing you all, in person, at our events and hope to return as soon as it is safe to do so. New measures will be in place at all our face-to-face events as your safety and wellbeing is our priority. We recognise the need to continue producing online content, and therefore will move to a hybrid event programme, planned for May onwards. This means, all our events that are hosted at venues around the country will also be made available to watch online on-demand, once the face-to-face events have taken place. Enabling our members who would prefer not to travel, to still benefit fully from our programme. To register for our 2021 Events Programme, please visit events.tenet.co.uk Our first events of the year are:

In this magazine we reflect on what has happened in 20 20 , as well as look to the New Year to discuss the latest opportunities and developments on the horizon. Our specialist providers discuss the impact of this year’s pandemic as well as offering valuable support, expertise, tools and business development ideas. We open this issue with Technical Services & Research department - they review the changing landscape of technical support throughout the Covid-19, and look forward to supporting firms in the New Year. In the wake of Covid-19, the world is a different place. While the emphasis on climate change persists, many countries and companies are understandably focused on saving lives and livelihoods. This presents an opportunity for companies and investors to embrace sustainable capitalism, think long-term and reset incentives. Fidelity’s full article is on page 8. Whether adviser firms are running in-house model portfolios or outsourcing to multi-asset solutions or to discretionary model portfolios, Elevate has the technology to help, as Standard Life’s Al Ward, Head of Platform Proposition explains. Page 9. The later life lending industry will no doubt get off to a flying start, as homeowners begin reassessing their finances following long periods of lockdown and uncertainty. We’ve never been better equipped to deal with this increased demand, building on the lessons learned from 2020 to offer best in market solutions for your clients and a robust income stream for your growing business. Full article page 12. M&G Climate Solutions Fund manager, Randeep Somel, discusses the risks of climate change inaction and why now is the time to take action. He presents the compelling long-term opportunities for investing in companies actively engaged in the fight against climate change. Page 16. Nicky Bray, Chief Underwriter at Zurich UK, and her team have never been busier. In a recent interview, Nicky shares her experience of working during the pandemic and how underwriting has been shaped by Covid-19. Read more on page 21. Good financial advice has never been more important, with investors facing the significant challenges of complex regulations, longer lives and lower returns. Vanguard’s Neil Cowell reflects on the key elements required for success. Page 25. I hope you enjoy reading the varied selection of interesting and informative articles provided. Here’s wishing you all a very Happy New Year.

Event

Date

Time

Protect One Online

Tuesday 23rd Feb 1:00pm-2:30pm

Protect One Online

Thursday 25th Feb 1:00pm-2:30pm

Protect One Online

Tuesday 2nd March 1:00pm-2:30pm

Protect One Online

Thursday 4th March 1:00pm-2:30pm

Event

Date

Time

Lend One Online Monday 22nd March 1:00pm-2:00pm

Lend One Online Wednesday 24th March 1:00pm-2:00pm

Lend One Online Monday 29th March 1:00pm-2:00pm

Lend One Online Wednesday 31st March 1:00pm-2:00pm

Event

Date

Time

Invest One Online

Tuesday 20th April

1:00pm-2:30pm

Best Wishes

Invest One Online

Thursday 22nd April

1:00pm-2:30pm

Cristina Giovanelli Marketing Consultant

Invest One Online

Tuesday 27th April

1:00pm-2:30pm

Invest One Online

Thursday 29th April

1:00pm-2:30pm

4 | Guide to Start Your Year - Issue 3

Start Your Year – TS&R 2020 has been predominantly been shaped by Coronavirus, and its impact has been felt across every industry, including financial services. However, TS&R have still been on hand to support with technical guidance, industry updates and case specific queries.

Alicia Walsh Technical Services & Research Consultant

Jo Rigby Technical Director

Guide to Start Your Year - Issue 3 | 5

Mortgage & Protection Support

Whilst COVID-19 no doubt took up a lot of our time, we also had our BAU activities to get on with. • 6 monthly panel reviews across all panel areas • R esponded to c5,500 queries into the TS&R mailbox • O ver 7,000 telephone calls with approximately 460 hours spent on the phone We also undertook a review of our iO templates in the year and launched a holistic template in August to wrap up all potential advice events in one report. We will continue to develop the templates in line with adviser feedback into next year. As to next year, we will see the ESG conversation continue as this has been a key theme of 2020. TS&R are working on a package of support material in respect of ESG including: • F act find questions • S uitability report wording • G uidance and support on ESG conversations • ESG panel Another busy year ahead for the team, but as always we are here to support your technical needs so don’t forget to pick up the phone and give us a call. Here’s to a quiet 2021!

at the forefront of the FCA’s focus, therefore we will endeavour to keep you appraised of all criteria changes with regards to income assessment and income sustainability on our Extranet criteria pages. Coupled with this, our new Tenet Portal holds detailed information on the protection providers on our Tenet Panel, assisting you to recommend the most suitable product for your client’s needs. Investment & Pension Support This daily support also stretched to the investment space, where we again issued updates on the impact of COVID-19. TS&R were quick to adapt to your requirements and deliver a superior level of service during this unprecedented time. Typically, our support centred on how you could submit applications electronically with electronic signatures as well as how to meet your regulatory obligation to undertake an annual review when clients didn’t want one. We also provided daily market commentary when we saw the markets first drop late February and followed the impact the pandemic was having on the stockmarket in general. What we have found with COVID-19 is it has expedited our greater use of technology which therefore means more timely interaction with clients, as well as providers rather than relying on snail mail. Our product and platform providers were quick to develop solutions to our changing needs and those of our clients. This is a huge step forward for us all.

Since the start of lockdown, TS&R sent over 310 industry and lender updates via our Mortgage & Protection bulletins. Communications were issued on a daily basis; ensuring you were informed of new FCA guidance in response to COVID-19 and were up to speed with rapidly changing criteria and underwriting stances. Lockdown was unchartered territory for everyone, so in order to support your engagement with clients, TS&R quickly produced several customer facing guides to help answer and alleviate client queries and concerns. March also saw Tenet launch our Covid-19 Hub, which provides news and support with a dedicated Technical Support zone. We included an addition to our Mortgage Research pages, building a COVID-19 criteria table which housed updates from every lender, and passed on key communications from lenders such as: • How to request a mortgage payment holiday, • How and when property valuations would proceed, • Which lenders would accept furlough income in support of an application, • Ever changing loan to value restrictions. Moving forward, one of the challenges the mortgage industry will face is likely to be limited availability of high loan to value mortgages, and more strenuous underwriting of protection cases. Responsible lending remains

6 | Guide to Start Your Year - Issue 3

Redundancy and Pension Planning

With the increasing impact of COVID-19 on the economy, as a society we’re witnessing a paralleled effect on people relating to both their social and financial situations, in particular in the over 50s. Since March 2020 we’ve seen many people put on furlough and in some circumstances, this has led to the increasing spectra of redundancy for many in this age group.

John Chew Pension, Tax & Estate Planning Specialist Canada Life

If your client were paid less than usual because they were on furlough as a direct result of coronavirus, the redundancy pay is based on what they would have earned normally. If your client was made redundant on or after 6 April 2020, their weekly pay is capped at £538 and the maximum statutory redundancy pay they can get is £16,140. An important point to remember is that redundancy pay (including any severance pay) under £30,000 is not taxable and this does pose some opportunities for pension planning which we’ll look at later. A quick example using the Gov.uk site 2 for a client age 55, with 3 years’ employment, earning £40,000 p.a. illustrates that they would receive a statutory redundancy pay based on 4.5 weeks, capped at £538 p.w. totalling £2,421. Hopefully, any employer terms would be more generous than these! In an ideal world, a client would have set aside savings for expenditure in case of emergencies amounting to 6 months (or longer), so what could a client do from a pension planning perspective? Before redundancy and/or during notice period • Your client should be looking to maximise their contributions into their employer sponsored scheme. Many employers offering workplace schemes will be investing a minimum of 3% contribution with your client paying 5% of their salary. However, some schemes will offer scope to match contributions if the employee contributes

For the over 50s, this further complicates their financial situation. On one hand, they’re already looking to the horizon and planning for retirement, whilst on the other juggling helping their grown-up children gain a foothold on the property ladder with potentially having to care for parents. So, what should be the approach if one day a client contacts you asking about options for their existing pension arrangements because they are at risk of redundancy? The most important aspects are to understand their current and projected cashflow to meet the needs and objectives for the period whilst they are not working. In most circumstances the employer will provide a set of terms to their employees which you would hope is better than the statutory redundancy pay permitted under legislation. However, that is not always the case. To understand this fully, as an adviser you need to know the terms that the legislation sets out. The minimum statutory redundancy pay 1 if your client was an employee and they had been working for their current employer for 2 years or more is calculated as follows: • half a week’s pay for each full year your client was under 22 • one week’s pay for each full year your client was 22 or older, but under 41 • one and half week’s pay for each full year your client was 41 or older Length of service is capped at 20 years. The weekly pay is the average your client earned per week over the 12 weeks before the day they got their redundancy notice.

more. It would not be unusual to see a maximum of up to 5% matching available. In simple terms, an employee can increase the pension contribution from 8% to 18% of salary. • For clients who are 55 plus and in a defined benefit pension arrangement, it would be worth exploring the discount factors that might be applied if their pension entitlement were taken before the scheme’s normal retirement date. In some cases, a scheme will reduce the discounting factors that would be applied to members pension due to redundancy and when they are close to retirement. • In a small number of situations, where a client might have a long period of service and a redundancy payment is in excess of £30,000, the employer might consider making a payment into the client’s pension as part of a negotiated settlement. Care would be required in these circumstances practically relating to a client’s annual allowance limit and any income tax consequences. Remember that there may be an opportunity to use the client’s carry forward allowances if available. • One area that requires particular care is where a large redundancy payment is spread over a tax year end. The key issue here is concerning anti-avoidance legislation, especially if the action would be to reduce

the impact of tapered annual allowance. Whilst there have been recent changes to these limits, care is still required to ensure the overall impact of the action is not seen as avoiding income tax.

Guide to Start Your Year - Issue 3 | 7

Pension planning post redundancy For clients who have enough emergency funds set aside, the redundancy payment could be a windfall. Using an element of the redundancy payment to top up their pension is an excellent way to increase their pot.

Contribution

20% tax relief

£15,000 Tax-Free

£15,000 Pension

£18,750 Pension

20% tax relief If 40% tax payer

£3,750 Tax relief via self-assessment

£18,750 Pension

not restrict future pension contributions. On the other side, the rates are sensitive to both age, health and location and therefore due consideration of these factors need to be balanced against drawing income from other assets available to the client. • Transfers from Defined Benefit Schemes, either full or partial, might appear an attractive consideration from a client’s viewpoint. However, these must be treated in the same light and consideration as if the client had not been made redundant. Whilst there is an obvious short-term change in client circumstances any action and recommendation still needs to meet the tests associated with this type of transfer. Recent changes to guidance issued by the FCA around transfers from safe-guarded benefits is noticeably clear on this point. Within the new guidance issued, it might be argued that due to redundancy, the client is suffering financial hardship and therefore an adviser could charge on a contingency basis. I would caution against this. A client who has received a redundancy payment which is tax free might be expected to use this to support any fees that might be charged for the advice and therefore not seen as suffering financial hardship. Finally remember, the FCA may well see this type of client as vulnerable and as such would test the approach adopted by the adviser and firm against the firm’s vulnerable client policy in place. Redundancy introduces for client’s uncertainty and increased levels of anxiety around their personal circumstances. Whilst as advisers you will not be able solve all the challenges your

There will be circumstances where the client will need to supplement their income and would look to potentially draw upon their pension, so what are the options and implications of these actions? • Firstly, the obvious point is that any withdrawals today will impact potential income in the future and there is only a limited period to make up any shortfalls in the pot. • The first element to consider is the utilisation of tax-free cash. The benefit of this is that these payments are not subject to income tax and can be phased to meet the monthly income needs of the client. The advantage is that these can be stopped or amended as required. However, there is the limitation that the tax-free payments are subject to the lower of 25% of the pot or 25% of the member lifetime allowance. • Any income taken in addition to the tax-free cash from the pension will impact the future opportunity to make pension contributions and should be carefully considered if the client is looking for continued employment. As soon as a single £1 of income is taken, the Money Purchase Annual Allowance (MPAA) reduces the potential of making further contributions and benefiting from tax relief from £40,000 to £4,000. • An option to be considered if income is required would be to look at using an Annuity to provide an income stream, perhaps to support the core needs. The advantage of this approach is that the client would not trigger the MPAA and therefore

clients will face, you will be able to assist them through the options and opportunities that they can adopt to either maximise their pension or to look at the best options to draw income, whichever is required. 1. Redundancy: your rights: https://www.gov.uk/redundancy- your-rights/redundancy-pay 2. Calculate your statutory redundancy pay: https://www.gov. uk/calculate-your-redundancy-pay Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England and Wales no. 973271. Registered office: Canada Life Place, Potters Bar, Hertfordshire EN6 5BA. Canada Life Platform Limited, trading as Canada Life, is a subsidiary of The Canada Life Group (UK) Limited, and is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales no. 8395855. Registered office: Canada Life Place, Potters Bar, Hertfordshire EN6 5BA.

8 | Guide to Start Your Year - Issue 3

Covid-19 and interest in ESG

Sustainable investing offers hope in a post-pandemic world

Jenn-Hui Tan Global Head of Stewardship and Sustainable Investing

Looking to the long term Covid-19 and climate change are both planetary events that challenge the way we live. So far, the response to the pandemic has been largely national or regional, not global. But the economic damage has also robbed many governments of the illusion that we can go on as we are. If necessity is the mother of invention, we are confronted today with the mother of all necessities. This presents an opportunity for companies and investors to embrace sustainable capitalism, think long-term and reset incentives for senior executives that are tied to achieving specific ESG goals. Sustainability factors are fundamentally a proxy for quality management, in my view. Corporate leadership teams that prioritise broader stakeholder outcomes are likely to be best placed to survive and thrive despite our twin health and climate crises, and offer the most stable and sustainable returns for shareholders. Important information This information is for investment professionals only and should not be relied upon by private investors . Past performance is not a reliable indicator of future returns. The value of investments (and the income from them) can go down as well as up and you may not get back the amount invested. A focus on securities of companies which maintain strong environmental, social and governance (ESG) credentials may result in a return that at times compares unfavourably to the broader market. No representation nor warranty is made with respect to the fairness, accuracy or completeness of such credentials. The status of a security’s ESG credentials can change over time. Investors should note that the views expressed may no longer be current and may have already been acted upon. Changes in currency exchange rates may affect the value of investments in overseas markets. Reference in this document to specific securities should not be interpreted as a recommendation to buy or sell these securities, but is included for the purposes of illustration only. Issued by Financial Administration Services Limited and FIL Pensions Management, authorised and regulated by the Financial Conduct Authority. Fidelity, Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited. UKM1120/325752/SSO/NA

So for 2020, our climate priority will be to work with companies to disclose scope 1, 2 and 3 emissions (i.e. direct emissions from operating activities and energy use, and indirect emissions within value chains) and set measurable targets to achieve decarbonisation. As part of the Climate Action 100+ group, we will lead on some of the engagements with the world’s largest emitters, encouraging them to take necessary action on this issue. We will also seek to engage on specific social themes such as employee welfare and to understand how companies are pivoting their business models towards greater social purpose. We have created a best practice guide for Fidelity portfolio managers and analysts to assist them when speaking to companies about how they are managing stakeholder

Before the pandemic hit, interest in environmental, social and governance (ESG) investing was growing in all regions of the world, and the biggest issue for many was the impact of climate change and how to address it. After Covid-19 put the brakes on global growth, it was possible that ESG’s rising tide would ebb. Some sceptics claimed that it would be a bull market phenomenon, and unlikely to remain a priority when entire industries were struggling to stay afloat. The truth could not be more different. COVID-19 has brought ESG issues to the fore with unexpected urgency. Chief among them has been the rise of “S”, with a much greater focus on employee welfare and the societal responsibility of businesses in a global crisis. Priorities – for corporations, households and governments – have changed dramatically. As the pandemic swept through Europe, luxury- goods giant LVMH, for example, switched from making perfume to producing hand sanitisers, as both use alcohol. Ford diverted airbag manufacturing capacity to making face masks that may reduce the spread of infection. Meanwhile, in Australia, Qantas Airways leveraged its partnership with Woolworths to place furloughed workers with the retail giant, redirecting vital labour to where it was most needed. Key ESG themes for 2020 and beyond In the wake of Covid-19, the world is a different place. While the emphasis on climate change persists in many geographies, with calls for governments to “green” the recovery, many countries and companies are understandably focused on saving lives and livelihoods. In this context, our engagement with companies becomes ever more crucial to ensuring that their business models are sustainable, in all senses of the word.

relationships and maintaining board effectiveness, as a result of the virus.

It will be important to find ways to address inequalities that open up due to the pandemic and ensuing recession; stimulus packages typically benefit owners of financial assets, not workers. Huge income disparities inevitably lead to abrupt rather than progressive change, which can be damaging. Following a range of successful engagements in 2019, we will continue to monitor how supply chains are changing, as we move from a pre- Covid world in which low-cost efficiency was paramount, to one in which resilience plays a bigger role. This could mean manufacturing moving closer to where customers are and paying more for labour. Lastly, as Covid-19 forces us to live more of our lives online, with more use of facial recognition and AI, we need fresh ideas on digital ethics to hold global tech giants to account.

Guide to Start Your Year - Issue 3 | 9

How Standard Life Wrap is helping... to provide advisers and their clients with some reassurance

We really believe these enhancements we’ve introduced on Wrap demonstrate the platform’s flexibility and the choice it can offer advisers. But one of the biggest benefits of these improvements is the efficiencies they can add to adviser firms, helping advisers run successful businesses. The enhancements should reduce the demands on their time so they can focus on key activities for clients and support them with more complex requests. Standard Life Wrap is continuing to provide the technology to help enhance advisers’ relationships with their clients. In these very challenging times, our platform is helping to deliver the peace of mind and efficiencies both advisers and their clients are looking for.

personalised and tailored digital experiences is on the up. We all have increasingly high expectations when it comes to the immediacy and ease of access to information, including clients. And we know Wrap’s new portal will help advisers deliver that personalised, online user experience for clients. The new-look client portal is accessible on any device, including mobile, The main purpose of the portal is to enable advisers’ clients to view their assets in a really easy and clear format. However, more than that, the portal will give them confidence that their assets are being well managed. We’re also bringing all parts of the platform up to the highest possible standard with these latest enhancements . This includes the secure access to the client portal which uses an authentication process that rivals the leading fin tech firms across the world. And as we all get used to a more digital way of working in a post-pandemic world, a high level of cyber security has never been more important. Aligned to the client portal is Wrap’s new client snapshot. The snapshot allows advisers to share a snapshot of their clients’ portfolios with clients in a professional and easy-to-read report. The reports not only help to support adviser conversations with clients and develop relationships with them, they can also help clients feel better informed in these unsettling times. We’ve also introduced a new income and withdrawal report on Wrap. The report will help improve oversight, governance and account management within an adviser firm. For those advisers managing clients at retirement, the tool will be especially useful.

Alistair Ward Head of Platform Proposition at Standard Life

Al Ward, Head of Platform Proposition at Standard Life Wrap highlights new client reporting enhancements now available on the platform. Back in January, little did anyone know what the next few months would bring. Since the spring, the Covid-19 crisis has dominated headlines and had a big impact on adviser firms as clients have looked for reassurance. Standard Life Wrap has recently introduced a series of enhancements that should go some way to helping advisers deliver a really great experience to their clients and help them provide that reassurance to clients. The improvements focus on reporting, cyber security and the launch of a brand new, user-friendly client portal. And to continue to help support advisers in the value they can offer clients, these improvements are only the first step in a series of enhancements we’re making to Wrap’s reporting suite. Our initial focus has been on valuations, performance and money movements. The on-going investment we’re making in Wrap’s reporting capabilities is keeping pace with a world where demand for more

To find out more about our enhancements to Wrap, visit here, take a look at our FAQ document

or speak to your usual Standard Life contact. www.standardlife.co.uk

The value of investments can go down as well as up and your clients could get back less than they paid in. The views expressed in this blog should not be regarded as financial advice. Standard Life Savings Limited, provider of the Wrap Platform, is registered in Scotland (SC180203) at 1 George Street, Edinburgh, EH2 2LL. Standard Life Savings Limited is authorised and regulated by the Financial Conduct Authority.

10 | Guide to Start Your Year - Issue 3

PETE DOESN’T KNOW HOW MUCH LONGER HE HAS TO LIVE OR WHEN HIS LIFE COVER WILL PAYOUT Read his story at WHATEVERY ADVISERNEEDS TOKNOW.COM

and see why we do things differently.

Pete is a fictitious character whose story has been created for illustration purposes.

Guardian Financial Services Limited is an appointed representative of Scottish Friendly Assurance Society Limited. All products are provided by Scottish Friendly.

Guardian Financial Services Limited is an appointed representative of Scottish Friendly Assurance Society Limited which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. Registered office: Scottish Friendly House, 16 Blythswood Square, Glasgow G2 4HJ. Registration number 110002. Guardian Financial Services Limited is registered in England and Wales under number 11115769. Registered office: 11 Strand, London WC2N 5HR.

Guide to Start Your Year - Issue 3 | 11

2020 in review In short, 2020 saw life change for us all, from how we work and socialise to how we learn and an increase in the number of GP surgeries returning medical reports digitally.

Record usage of HealthWise With the NHS under unprecedented pressure, it is no surprise that 2020 has seen record usage of Healthwise, our free member benefits app. We saw a 117% increase in year-on-year service usage with remote GP appointments being the most sought after service. Reminding clients of the valuable services included within their policies is hugely important in the current climate. It also provides an opportunity to assess whether their current protection arrangements are adequate for their needs. Helping you to grow your business Our income first toolkit has all the tools you need to discuss IP, including our income risk calculator, a client approach email and more. We’ve also simplified our Real Life quote process making it easier for you to submit business with us. We now offer you two options to obtain a quote when placing cover with us. We can provide a partially-underwritten quote for clients with diabetes, a history of heart attack or angina, obesity, or stroke. Or you can opt to receive a “quick quote” by calling our underwriters to receive an indicative loading over the phone. We’ve also added valuable CPD and insights to our adviser knowledge centre to help you meet your CPD learning commitments. You matter more We look forward to working with you in 2021 and are committed to supporting you and helping you grow your protection business. For a personal introduction to The Exeter, book a short webinar with one of our Adviser Account Managers at www.the-exeter.com.

communicate. We have all been impacted by the coronavirus pandemic. And whilst the changes at times have been difficult, each of us has adapted. We remained committed to you Whilst it’s been positive to see some insurers re-enter the short-term income protection (IP) market, it’s a market we never left. At The Exeter, we took the stance to stand strong for you and your clients. While others withdrew short-term waiting periods from their products, we felt strongly about supporting those with an urgent need for this type of cover, especially key workers. We are proud to have provided cover to thousands of applicants who needed one day, one week, and four week waiting periods throughout the pandemic. With the support of our reinsurers, we have continued to offer life cover to those with complex medical backgrounds, in the most uncertain of times. Many of your clients will have been impacted financially because of coronavirus. To prevent policies from cancelling when members were struggling to pay premiums, we waived them. This approach allowed us to retain 80% of policies where members were struggling to pay, ensuring they continued to have valuable cover in place in the future. We considered claims for self-isolation across our IP products and made ex-gratia payments outside of the policy terms and conditions, where appropriate. The significant technology enhancements we introduced to our claims process also saw 50% of digital claim forms returned fully completed within 48 hours of issue. We also launched virtual screenings to obtain medical evidence for clients and saw

Steve Bryan Director of Distribution and Marketing

12 | Guide to Start Your Year - Issue 3

A growing market in a challenging environment

Be a part of it Demand for later life lending is increasing, making it the perfect market for advisers and introducers to diversify into, plugging income shortfalls from other revenue streams. As an industry, it is our duty to work together to educate, inform and provide retirees with solutions that will give them financial security and stability. Key Group feel it is our duty to equip advisers with the knowledge and support you need to continue offering the highest- quality service to your clients. We aim to do just that with a range of tools, resources and courses that you can access on demand: • The more2life Learning Lab – for advisers who have equity release qualifications - https://www.more2life.co.uk/learning-lab • Key Partnership’s Resources For You – for introducers who want to refer equity release clients - https://www.keypartnerships.co.uk/ resources-for-you The future looks bright 2021 looks set to be an exciting year for the later life lending industry. It will no doubt get off to a flying start, as homeowners begin reassessing their finances following long periods of lockdown and uncertainty. We’ve never been better equipped to deal with this increased demand, building on the lessons learned from 2020 to offer best in market solutions for your clients and a robust income stream for your growing business.

of processes and significant system changes have transformed the market for the better; speeding up processing times, opening up geographical reach, and reducing admin work. Inevitable growth The later life lending market is set to not only recover, but prosper. People are living longer and spending more time in retirement. Together with rapidly depleting pension pots, increased debt levels and the spiralling cost of living - exacerbated by the effects of the pandemic – mean many people will retire facing greater levels of financial pressure. According to the Equity Release Council, agreed equity release plans increased by 41% to 10,351 in Q3 2020. Housing wealth-based products like equity release can help people gain greater financial freedom in later life and help family who might be struggling financially due to the economic impact of the pandemic. An attractive proposition The cost of equity release products has declined at an opportune moment. Over half of more2life’s plans offer a rate of 4% or lower, and a quarter are below 3%. With the focus remaining firmly on the customer we’ve not only seen safeguards maintained; we’ve seen them increased as companies focus on helping customers make sustainable decisions.

Gary Little Business Development Director

When the clock struck on the dawn of a new decade in January this year, few could have predicted the strange and unfamiliar territory in which we would find ourselves. 2020 will no doubt be remembered as the year of collective uncertainty and fear; forced change and ‘new norms’; lockdowns and closures. For financial services it was the year advice norms were thrown into disarray as face- to-face client meetings were forbidden, the normal lending process ground to a halt, and the legal process of conveyancing was disrupted. There’s certainly no denying the impact that the global pandemic has had on each and every one of us. But there have been glimmers of hope throughout the dark times, as we were forced to pause, evaluate and change. What we witnessed was incredible resilience. Adapting for survival Across every industry businesses have had to rapidly adapt just to stay afloat, as we all scrabbled to feel normal in a world that is anything but. And the later life lending market is no exception. The industry demonstrated a remarkable ability to bounce back, as we found innovative ways to carry on with business. Although these changes to ways of working were forced, they were also necessary. The digitalisation

Guide to Start Your Year - Issue 3 | 13

Just For You Lifetime Mortgage Case Study

J6 series with Cashback option allows Frances to top-up borrowing by £10,250 Frances Knight’s story

• Frances, 76 is recently widowed and lives in a 2-bedroom terraced house in Surrey valued at £410,000. As her husband dealt with all of their finances, she isn’t aware that there’s still a £75,000 mortgage on their property. • Her two children have recently lost their jobs and are struggling to make ends meet. One of them is facing the prospect of losing their home as he’s having difficulty paying the mortgage. • Frances wants to raise funds to pay off her £75,000 mortgage, help her children with £50,000 each and clear her £30,000 bank loan.

How can the Just For You Lifetime Mortgage help her? Our J6 series offers one of the highest LTV ranges available without requiring health and lifestyle information. Based on Frances’s age, the J6 series could provide up to 50% LTV. This means Frances would be able to release a maximum amount of £205,000, which is enough to meet her stated objectives. However, she would also like to make some home improvements, so she’s keen to raise as much money as possible.

With 1% cashback

With 2% cashback

With 3% cashback

With 4% cashback

With 5% cashback

J6 LTV series

Additional amount Frances can access

£2,050

£4,100

£6,150

£8,200

£10,250

Interest (AER%)

5.64%

5.75%

5.85%

5.96%

6.06%

All numbers are illustrative only to show how the Just For You Lifetime Mortgage could be used. This is not intended to provide any form of advice or recommendation.

bank loan, help her children when they need it the most and make the much needed home improvements. The Just For You Lifetime Mortgage would allow Frances to: • Release the money she needs to clear her mortgage, bank loan and help her children 2 . • Use the cashback option to get extra funds so she could improve her home. • Use the flexible cash facility to release the funds as they’re required and avoid accruing interest on the total from day one 3 . • Potentially reduce the interest rate over the period of the mortgage by paying off some of the interest each month.

Notes: 1. The interest rates are correct as at 14 October 2020. 2. Using a lifetime mortgage to repay existing debt may cost more in the long-term. 3. For clients choosing to take the cash facility option, there will be a 0.05% increase to the MER rates. For more information Call: 01737 233297 (Lines are open Mon - Fri, 8.30am to 5.30pm) Email: [email protected] Web: justadviser.com

How can the Just For You Lifetime Mortgage make it even better?

Frances’s adviser has heard about the flexible cashback facility and checks whether this could produce a better solution for her. As our cashback facility offers up to 5% of the initial loan amount (up to £20,000), Frances can access an extra £10,250 which she can use for her home improvements. Although the interest rate is higher than without a cashback, the extra funds are invaluable for Frances. This gives her the peace of mind of knowing she could clear her mortgage,

14 | Guide to Start Your Year - Issue 3

Time is of the essence

are allotted. If the investor has to wait 18 months, then you can see how long they might have to wait before securing their tax reliefs. Advisers and investors might also want to be sure about the timing of full deployment. Managers may talk about monthly or quarterly deployments but the killer question to ask is at what point full deployment will be made? Managers may invest in one company a month, so if the client is expecting a portfolio of 12 investee companies then that could take 12 months. Of course, such delays at any point in the process will also delay any exit the investment manager might wish to make, which in turn would mean delays in providing any returns to the investor. In our view, monthly full deployment is reassuring to advisers and investors, and takes away the above concerns. When this is added to a quality manager which has strong deal flow, sector expertise, significant experience and a history of strong results, the investment decision is made that much easier. We will soon be motoring towards the end of the 2020/21 tax-year, where time will most certainly be of the essence. Particularly if an investor wishes to utilise carry-back and claim potential income tax reliefs against the 2019/20 tax year. To do that, they must be fully- deployed by the 5th April and therefore the choice of manager should become ever clearer – make the most of those quality managers who deploy quickly and efficiently and ensure your client is in the best position possible to benefit fully from their EIS investment.

And yes, that is rather frightening for all concerned but we are now well beyond that. Instead, advisers and investors can be reassured that these days the vast majority of fund managers providing EIS propositions are genuinely supporting growth-focused investment opportunities in line with the legislation and, possibly more importantly, firmly within the over-riding spirit of EIS and how it was initially envisaged. That’s a firm and welcome sea change, but for advisers once they’ve established the credentials of an investment manager in this space, what should be the next key question(s) to ask? Well, from my perspective and experience, we are back to timing, because the key question to ask should really be about speed of deployment of funds to the investee companies. Of course, speed of deployment should never usurp the quality of the underlying investment, but if you have a choice between established managers, and one is able to fully deploy funds within a month while the other says they may take up to 18 months (or longer), then one might well think the former is the better choice. After all, it is only when a client’s funds have been deployed into the underlying investee company – and shares have been allotted – that the company can start the process to provide the investor with an EIS3 certificate, which usually takes approximately 12-14 weeks from the deployment of funds. This is an important document, given that it is the receipt of the EIS3 certificate which acts as the trigger for the client to then access any appropriate tax reliefs – although the important date from HMRC’s perspective when applying tax reliefs is the date the shares

Andrew Aldridge Partner, Head of Marketing at Deepbridge Capital

2020 was a somewhat strange year for all involved, not least for financial advisers who had to act quickly and decisively to reassure clients and to maximise opportunities. One element of financial planning that remains constant no matter what else is going on in the world is the need for tax planning. Yet, this is an area where the need for speed and decisive action has not always been appreciated, particularly when we look at utilising the generous potential tax reliefs of the Enterprise Investment Scheme. So, in terms of time and EIS, where are we today? Well, investing via EIS has perhaps never been more commonplace for financial advisers or investors; we see this every day – there has never been a greater appetite for supporting early-stage, growth-focused companies and, of course, the generous tax-reliefs potentially available via EIS are key drivers for this. Gone (thankfully) are the days of tax-efficient fund managers introducing their propositions with the opening line, “We’ve looked at the legislation and think we can get away with this.” I’m paraphrasing but this was the sentiment from one manager representative who I heard talking about their fund a few years ago.

Guide to Start Your Year - Issue 3 | 15

Intergenerational financial planning – keeping it in the family

members, however, larger gifts will typically take seven years to fully fall outside of the taxable estate. Another option is to set up a trust which is exempt from IHT, however, as with gifting, once the assets are in the trust, the individual loses control. An alternative tax efficient option is investing in shares that qualify for Business Relief (BR) and holding them for more than two years. To qualify for BR, the shares must be in either an AIM listed company or a private company that trades rather than invests. BR qualifying shares receive up to a 100% IHT exemption, depending on the stock, and the individual retains control. The shares can be held directly or form part of an ISA giving the investor added flexibility. However, these are investments and are not without risk. Home is where the heart is How people deal with the family home is also an area where advisers can add significant value. The nil rate band remains at £325,000, meaning anyone with an estate exceeding that figure is potentially liable for IHT. Clearly this is an issue given today’s escalating house prices. In response, the government introduced the Residence Nil Rate Band (RNRB), which allows home owners potentially an additional £175,000 before they are subject to IHT. Super savers Flexible pensions are another tax efficient way of passing on money. If the pension scheme member dies before age 75, their nominated beneficiaries will not have to pay

any tax on withdrawals. If the pension member dies after age 75 pension assets become taxable, but only at the marginal rate of income tax of the recipient. Meanwhile, ISA holdings still form part of the taxable estate for IHT purposes and a surviving spouse or civil partner can inherit ISA funds from their deceased partner. It is possible to invest ISA funds in AIM listed companies that can qualify for 100% IHT relief after two years of ownership. We all know the saying ‘you can’t take it with you’ but the pot still needs to last until the end. Intergenerational planning is about striking a balance between providing for each of the individuals, with the right tax efficient income to cover different needs at various stages of their lives. The right advice at the optimum time is crucial in ensuring each generation can share in the family’s wealth both today and in the future.

Harry Donoghue Strategic Partnerships Manager, TIME Investments

In any one family, it is now quite typical for four generations to be alive and well. The result is increasing the importance of considering financial planning on an intergenerational rather than individual basis. Inheritance Tax (IHT) is hefty – 40% of the total qualifying estate – yet our own research shows that over a third of consumers aged 55 and over who use a financial adviser have not yet considered IHT planning. Financial advisers need to think about the family as a whole; rather than focusing on the wealthiest generation in isolation as there will be opportunities to help all members of the family who will experience different financial challenges simultaneously. Assessing how much income is required in retirement This is a difficult question but with an idea of inflation expectations, lifestyle and health, some indication can be achieved. Next, is to establish whether they can reach that income target based on an assessment of assets. Where there are surplus assets, now is the time to assess IHT planning. There are several tax efficient ways to pass assets to descendants, all with their own constraints and considerations. The easiest route may be gifting to family

For more information, please get in contact at [email protected] or call 020 7391 4747.

16 | Guide to Start Your Year - Issue 3

The Climate Emergency and the positive role investors can play

The 2015 Paris Agreement on climate change committed countries to keep the increase to well below 2°C and pursue efforts to limit the increase to 1.5°C – a level at which the risks and impacts of climate change are much lower. According to the Intergovernmental Panel on Climate Change (IPCC), a 2°C temperature increase would exacerbate extreme weather, rising sea levels, diminishing Arctic sea ice, coral bleaching, and the loss of ecosystems. A time for ambition – and action Transformational action can no longer be postponed. The UN estimated in 2019 that global emissions must fall by 7% a year on average from 2020 to 2030 to get on track to achieve the 1.5°C goal. By 2050, we must achieve net zero greenhouse gas emissions worldwide. Meeting this challenge demands deep and far- reaching reductions in emissions across all aspects of the economy. Looking at the primary sources of greenhouse gases, we can see where solutions can have the greatest impact. There are some elements of the climate equation – reducing food waste and flying less often, for instance – that we can address individually through decisions in our daily lives. Lifestyle choices can only cut emissions so far, though. Altering the course of climate change demands that we find and embrace alternative energy sources and more efficient ways of producing goods and services. This will require vast investment. The International Energy Agency estimates that around US$1.3 trillion a year needs to be invested if UN Sustainable Development Goal 7 – affordable and clean energy for all – is to be achieved by 2030. Investing in the solutions With growing recognition of the urgency of the challenge, we believe there are compelling long-term opportunities for companies that are actively accelerating the shift to a low carbon economy. I perceive three key areas where companies can have a positive impact in the fight against climate change. The first is where activities or innovations directly cut greenhouse gas emissions. Alternative energy is an obvious sector for investment. Replacing carbon-intensive fossil fuels with green electricity, harnessed from the wind and sun, would make the single biggest contribution to meeting global climate goals. Less obvious

investment candidates, perhaps, are components and systems that improve energy efficiency, thereby reducing emissions. The second group of impactful companies are those whose solutions make industry and transportation – which account for 35% of emissions combined – less polluting. This may include companies whose technologies underpin the future of mobility or energy storage. Thirdly, companies that contribute to a more circular economy – by designing out waste, keeping materials in use for as long as possible, and regenerating natural systems – can also play a major role in the transition to a resource-efficient, low-carbon economy. Addressing the climate emergency The risks of climate inaction are present and mounting. The cost of extreme weather events is rising: three of the costliest Atlantic hurricanes on record have occurred since 2017. We need to understand how investments are not only exposed to the risks associated with climate change, but also how they can seize the opportunities it represents. Where companies do not act, they will miss the opportunities for success that lie in tackling this challenge. There does not need to be a trade-off between profits and the planet. Where companies can successfully deliver solutions that mitigate climate change, their shareholders can aspire to achieve sustainable financial returns and contribute to a demonstrably positive impact for the planet and its people. The views expressed in this document should not be taken as a recommendation, advice or forecast. When you’re deciding how to invest, it’s important to remember that the value of investments goes up and down. So howmuch your investments are worth will fluctuate over time, and you may get back less than the original amount you invested. This financial promotion is issued by M&G Securities Limited which is authorised and regulated by the Financial Conduct Authority in the UK and provides ISAs and other investment products. The company’s registered office is 10 Fenchurch Avenue, London EC3M 5AG. Registered in England andWales. Registered Number 90776.

Randeep Somel M&G Climate Solutions Fund Manager

Climate change poses a real and present danger to the well-being of people and the planet. The next decade presents a critical window in which we can still shape its trajectory. It is crucial that we act on this opportunity now to change course. If we set greenhouse gas emissions on a downward path by 2030, we can hopefully control the increase in global temperatures to levels that would limit challenging impacts on natural ecosystems and human health. Achieving this not only demands that we change our behaviour, but that we also invest heavily – and urgently – in the transition to a low-carbon economy. I believe that where companies can provide solutions to the greatest challenge faced by the planet, they can present compelling opportunities for long-term investors. In turn, investors can play a part in addressing the climate emergency. What the science tells us The Covid-19 pandemic brought much of global society to a standstill in 2020. Meanwhile, the dramatic effects of climate change continued unabated, posing their own threat to natural habitats, human populations and the economy. In a year when record wildfires raged along the US west coast and as far north as the Arctic Circle in Siberia, the Atlantic hurricane season was so active that it ran through the alphabet of storm names by early September. The five-year period 2016 to 2020 is set to be the warmest in history. Despite the economic downturn of 2020, concentrations of greenhouse gases like carbon dioxide (CO2) in the atmosphere are at record highs and continue to rise. These emissions from human activity are driving climate change. Without sustained action to reduce them, the UN estimates that the world’s average surface temperature will surpass 3°C degrees above pre-industrial levels by the end of the 21st century.