The Lifetime Allowance Explained

U.K. Chancellor George Osborne Delivers Annual Spring Budget Statement

Every UK citizen currently has a Lifetime Pension Allowance. This is the total amount you can save in your lifetime into pensions, work or private, without additional taxes being applied.

Background: An allowance in free fall

The current rate in 2015 is £1.25 million. However, this is set to be reduced to £1 million in April 2016. This is not the first time it has been lowered. Successive governments have seen it as an easy tax raid. The consequence is that it reduces the capacity of high earners to make tax efficient contributions to their pension funds.

When first introduced, the Lifetime Allowance was set at £1.5 million and then increased each year to £1.8 million in the 2010/11 tax year. Since then the allowance has been in free fall as the government has attempted to rein in spending.

Any increases in the Lifetime Allowance in the future are planned to be only by the annual rate of inflation. Current estimates indicate that on this basis the allowance won’t break the previous £1.8 million level until 2036.

So what happens if you exceed the lifetime allowance?

Pension funds are only assessed against the Lifetime Allowance when a benefit crystallisation event occurs. Most commonly, this is when you take a tax-free cash lump sum from the pension, or the pension is entered into drawdown. There is a final longstop crystallisation event at age 75, when all pension benefits are assessed against the Lifetime Allowance.

It is also possible to part crystallise a pension in order to keep any funds in excess of the Lifetime Allowance excluded from assessment for as long as possible until age 75.

Any funds that exceed the Allowance when an assessment is made can be taxed in one of two ways;

1. The excess can be taken as a lump sum and a one off 55% tax charge is applied.

2. The second option is to leave the funds within the pension and pay a 25% tax charge.

What could you do if you incur a charge?

The tax charged is essentially income tax so it may be worth considering making tax efficient investments in the same year to offset the effects of the taxation on the funds. Venture Capital Trusts and Enterprise Investment Schemes can offer tax relief of 30% against income tax paid in the current or previous tax year. These are regularly used in conjunction with excess Lifetime Allowance withdrawals to re-claim some of the tax that would have been paid.

Does this affect you?

The Lifetime Allowance is a complicated topic. Capital Wealth Partners are one of the UK’s leading advisers on this topic. We have an open information policy that allows you to ask questions in order to establish the best way to approach potential Lifetime Allowance charges.

Alexander Ogden is a Private Client Director at Capital Wealth Partners. He is one of the UK’s leading advisers on the pension Lifetime Allowance and high value pensions for high net worth clients. For further information on this topic or on advanced estate planning, he can be contacted at or by phone on 0844 338 6622.

General election could mean stock market chaos


The general election could trigger chaos for the stock market as investors pile in or offload shares – but this is likely to happen in the months after the vote rather than in the build-up as many people believe, according to research from Axa Wealth.

Despite talk of political uncertainty shaking the FTSE All-Share Index in the build-up to the vote, new research has revealed that the three months before the last five general elections have been relatively calm. However, the market could swing dramatically following the result, according to analysis of historic data by Axa Wealth.

In four of the last five elections (1992, 1997, 2001, 2005 and 2010) the index – which includes the FTSE 100, the FTSE 250 and the FTSE Small Cap Index – swung sharply in the three months following the vote compared to the three months before. The most marked shift came in 2001 when Labour won a second term in power in what was dubbed a “quiet landslide”. The index moved just 0.61pc in the three months leading up to the result but then dropped by13.36pc in the three months afterwards – pulled down by tumbling financial services stocks.

Mining shares tend to perform strongly in the build-up to a general election, whereas banking stocks typically rise amid post-election turmoil, the study found.

“Certain sectors seem to thrive on the political uncertainty that an imminent election engenders,” said Mike Kellard, chief executive of Axa Wealth. “Mining stocks strongly outperformed the market before three of the last five elections. On the other hand, financials perform strongly in a more settled political environment [when there is a clear leader in the polls].”

However, uncertainty ahead of this election – one of the most open in modern times – has deterred small companies from listing on the AIM market.

Only 10 companies floted on the index in the first three months of this year – a 63pc drop on the previous quarter according to research from UHY Hacker Young.

“The upcoming election has generated increased caution among companies and their investors, perhaps more than usual because of the possibility of a hung parliament,” said Laurence Sacker, corporate finance partner at the accountancy group.

To see the full article go to: The Telegraph

FTSE 100 closes at record level

_81212069_lse1_gettyThe FTSE 100 share index has hit a new high, passing through the previous record set on 30 December 1999. It closed at a new peak of 6,949.63. The previous record close was 6,930.2, set at the height of the dotcom boom. Earlier, the index also set a new intra-day high of 6,958.89, surpassing the previous figure of 6,950.6, also set on 30 December 1999.

Shares rose after eurozone finance ministers approved reform proposals submitted by Greece. The proposals were a condition for a four-month extension of Greece’s bailout. The agreement also had an impact on Greek stocks, with the benchmark Athex index ending the day 9.8% higher.

About time

Stock markets around the world have been buoyed by economic stimulus programmes put in place by central banks after the global financial crisis that hit in 2008.

“Equity investors have been riding the wave of cheap money, fuelled by unconventional monetary policies pursued by the world’s central banks which have allowed this bull market to extend well beyond the duration of your average length of a bull market,” said Angus Campbell, senior analyst at online currency broker FxPro.

The FTSE 100’s rise has been slower than those of stock markets in the US and Germany.

“It is hardly impressive that, more than 15 years later, the FTSE 100 has finally breached its previous record close, said Samuel Tombs, said senior UK Economist at Capital Economics.

“Both the S&P 500 and Dax 30 exceeded their millennial year peaks in 2007 and they are now about 45% and 65% higher respectively,” he said.

Analysts say that low interest rates for savers have encouraged people to invest in the stock market.

“One of the big drivers for the FTSE right now is this expectation that if you hold on to equities [shares] you’re going to get an enormously greater yield than cash rates so lots of people are piling into equities,” said James Bevan, chief investment officer at investment firm CCLA Investment Management.

Higher still?

The FTSE 100 advanced for a record six straight years after it was launched in 1984. One of the rockiest periods in its history was during the financial crisis.

The FTSE 100 had its worst year on record in 2008, when the crisis wiped 31.3% of the index’s value. But on 24 November 2008 the index made its biggest one day gain of 9.8% when the US federal reserve stepped in to rescue Citigroup.

The FTSE 100’s biggest one-day fall occurred on 19 October 1987, so-called Black Monday, when ripples from Wall Street’s stock market crash prompted a 12.2% drop. As for the next move: “It looks as though the best gains have been made and further upside could be limited”, said Mr Campbell.

However, the FTSE 100 could fare favourably against its international peers. “We think that the outlook for the FTSE 100 is a bit brighter than for most other developed market equity indices,” said Mr Tombs

FTSE 100 surge towards record levels

ftse100After a sleep January it is good to see the FSTE driving towards its all time high.

Investor relief that the new Greek government is attempting to end the impasse with its international creditors helped the FTSE 100 surge towards record levels.

Britain’s benchmark stock index climbed 77 points to 6859, a 1.1pc jump that took the gauge to within 100 points of an all-time high.
It has been 15 years since the FTSE 100 set its record of 6,950. The peak was reached on the last trading day of 1999, just before the dotcom bubble burst. On Tuesday, however, investors pushed British shares close to a new all-time high after Yanis Varoufakis, the Greek finance minister, set out measures to swap outstanding loans for growth-linked bonds.

Fears were growing that the stance taken by the radical left-wing Syriza administration in Athens over Greece’s debts would erupt into a fresh eurozone crisis.

The proposal from Mr Varoufakis was the first sign of the anti-austerity government’s willingness to end a stalemate that Chancellor George Osborne on Monday said was “fast becoming the biggest risk to the global economy”.

Deutsche Bank strategist Jim Reid said:

“Whether the combination of growth linked and perpetual bonds that have been proposed are workable is open to question but it does seem that Syriza have blinked first in this stand-off after a very feisty week one of their new administration.”

European stocks were also galvanised by the conciliatory move. The Athens Stock Exchange surged 7.4pc, while the CAC 40 in France was up 1.2pc and Germany’s DAX gained 1pc.

Bond investors similarly welcomed the Greek proposal, with the yield on the nation’s 10-year debt falling the most since 2012 and yields on three-year notes declining for the first time in seven trading days.

Screen Shot 2015-02-03 at 19.09.32The rebound in oil prices also buoyed stock markets. Brent crude climbed 3.5pc to $56.67 a barrel, continuing a rally that started on Friday evening when data showed a record drop in US rigs, signalling production was starting to decline.

A global supply glut of the commodity saw the price of Brent more than halve from its June peak of $115 last year. The plunge hit the FTSE 100, which is heavily-weighted towards commodity stocks such as BP and Royal Dutch Shell.

Jean-Claude Juncker, the president of the European Commission, said on Tuesday that while Brussels respected Greece’s democratic vote, policymakers would not re-write the European rulebook in order to put Greece on a sustainable growth path.

“Obviously, we have to take account of the democratic expression of the Greek people,” he said. “[But] it’s not just one European country that has expressed what it wants democratically. There are other opinions in Europe, democratically expressed opinions.
“So yes, we are going to have to do a certain amount, but we’re not going to change everything because of one electoral result that some people may like and some people don’t like.”

Original article by The Telegraph 


ECB surprises with €1.1 Trillion QE

100045421-european_central_bank_getty.1910x1000European Central Bank (ECB) president Mario Draghi has announced an asset purchase programme that could total more than €1trn in an attempt to revive the eurozone’s flagging fortunes.

The central bank will begin a bond-buying programme in March, Draghi said today, purchasing €60bn of assets each month until the end of September 2016 or until inflation displays a sustained improvement.

The figure is at the higher end of investor expectations, and above the €50bn per month figure rumoured yesterday.

Significantly, the programme will encompass bonds ranging from two to 30 years in maturity. Asset purchases will be made by national central banks, with up to 20% of any losses being shared.

“Today’s measures will decisively underpin the firm anchoring of medium- to long-term inflation expectations,” Draghi said.

The ECB also revised the terms of its long-term refinancing operations (LTROs), with further details to be released later this afternoon.

The euro dropped more than 1% against the dollar in response, falling below $1.15 to a fresh 11-year low. The single currency also fell to a 7-year low against the pound at 75.9p.

European and UK stock markets rallied on the news, with the FTSE extending gains as Draghi began speaking and later climbing back towards the 6,800 mark, a rise of 1%. The EuroStoxx 50 stood up 1.4% at 3,315 by 15:30 GMT.

Elsewhere peripheral and core eurozone bonds rallied, with yields on benchmark Spanish debt falling to record lows as investors turned to the asset class once again.

Expectations of a QE announcement have been growing since last year. But the size of today’s package came as a surprise.
A poll of 176 investors conducted earlier this week by Société Générale revealed almost 70% expected the ECB to launch a QE programme of around €500bn.

Over the last few months Draghi (pictured) has continuously hinted at plans to launch QE, saying the bank is ready to take further monetary policy action to combat falling inflation and weaken the euro.

Figures published in December showed the eurozone fell into deflation at the end of 2014, adding to the region’s mounting problems and making QE more likely.

Screen Shot 2015-01-23 at 08.14.23

The eurozone also continues to battle with low economic growth, with the latest numbers suggesting the economy expanded by just 0.1% in the final quarter of 2014.

In October, the bank began purchasing asset-backed securities as the deflationary environment continued to intensify.

At the time, the announcement caused a rally in European stocks, especially banks, which were expected to benefit from covered bond purchases.

Some investors have already begun shifting allocations to Europe on expectations of a QE-fuelled rally.
Jupiter’s John Chatfeild-Roberts is among the many to have predicted last year that QE in Europe will boost equity prices in the region.

Original article at: Investment Weeks

FT Economist survey 2015

f07387c7-1d40-430f-8225-e695879bcde2The financial times has released the collective thoughts of some of the top economists in the World in regard to their outlook on the economy in 2015.

One of the common thoughts is the hope that lower energy prices will help bolster an otherwise flat looking economic climate in Europe. The economic sanctions in Russia and their pending financial crisis is having an effect on European countries and this mixed with the uncertainty regarding the stability of several EU members such as France and Italy make accurate forecasting even harder, as their is such mixed opinion on what the outcome will be.

Most economists are forecasting 1% growth for the year in line with 2014 but expect nothing exciting to happen at the start of the year with any gains being made towards the later half when the effects of lower energy costs and a weaker Euro start to kick in

To read the full review by the Financial Times follow the link below:

FT Economist survey 2015

Family 1st

Capital Wealth Partners are proud to announce the launch of our ‘Family 1st’ project. Over the next three months we will be working with a leading first aid provider to offer young families free first aid training.

As a financial services company we understand the need young families have for both physical and financial protection and with only 1 in 20 families have adequate life insurance in the UK we are doing what we can to raise awareness.

We will be inviting young families to attend one of the workshops where they will have the opportunity to complete a certified first aid training course that has been specifically designed to provide parents with the skills needed to protect young children. The course will teach parents to consider the unexpected and we hope that this will also lead to them considering the implications of the unexpected on their financial as well as physical lives.

During the course parents will learn how to:

  • Provide CPR for both babies and young children
  • Treat a choking child
  • Treat burns and open wounds
  • Treat breaks and sprains
  • Top 5 things to look out for

By the end of the course our expert medical staff will have provided parents with both the knowledge and confidence to treat their child in the event of an emergency and will have the opportunity to continue their training should they wish to and achieve a nationally recognised first aid qualification.

Large IPO’s expected to return

rolet_2243816bThe turbulent and uncertain last few months has led many companies that planned IPO’s this year choosing to either place them on hold or push them back. The below article from the telegraph leads us to believe that many of them are planning to return in the coming months, leading to many more large IPO’s.


The London Stock Exchange expects more companies to revive their plans to float in the coming weeks, following a strong six months for the market operator that delivered a 15pc rise in revenues.

Xavier Rolet, the chief executive of the LSE, said: “The combination of the Scottish referendum and the market wobble a few weeks ago added a note of uncertainty that created for a number of issuers a valuation issue and made them postpone the deals.

“But as we have seen, Virgin Money is back and the pipeline remains very strong and I believe between now and the end of the year, early next year, we will see some of the larger cap firms coming back to the market.”

He added that the junior market Aim had continued to launch several IPOs a week during the year, which he hailed as “part of the tech revolution that’s happening in the UK” as high-growth start-ups access the market.

Companies that have recently withdrawn their float plans during the market turbulence include the challenger bank Aldermore, which postponed its IPO in October; Edinburgh-based housebuilder Miller Group; and BCA, the company behind We Buy Any Car.

Many firms that took part in the wave of stock market debuts earlier in the year have been left trading below their IPO price, including AO World, Pets at Home and Saga.

The LSE said capital markets revenue rose 13pc to £164.6m in the six months to the end of September, with increasing activity on the primary markets, where the number of new issues rose from 79 to 126 over the half-year, and the secondary markets.

Companies raised £27.5bn on the LSE’s markets in London and Italy in the period, up 83pc on the same time last year.

The firm’s total revenues rose 15pc to £592.6m, while operating profits rose 10pc to £172.3m.

The £1.6bn acquisition of Frank Russell, which is expected to complete by the end of the year, brings with it the biggest benchmark provider in the US and an investment management business, which the LSE is reviewing. Russell’s indices business will be integrated with FTSE.

About a third of the LSE’s revenues will come from the US once the takeover of Frank Russell completes, and Mr Rolet said the firm has its sights on more bond trading and building on its position in interest rate swaps.

LCH.Clearnet, the clearing house that the LSE bought in 2012, posted a 30pc rise in revenues at constant currency to £165.7m. Future revenues will take a hit from the end of the commodities clearing contract with the London Metals Exchange in September, though higher tariffs on fixed income trading are expected to cushion the blow.

“The LSE has transitioned from being a potential victim of consolidation to being a consolidator in its own right. Management is taking very important steps to diversify the business and, thus, de-risking it,” said Owen Jones, an analyst at Espirito Santo.

The firm plans to pay an interim dividend of 9.7p per share, a rise of 4.3pc on last year when adjusted for a rights issue earlier this year that was used to fund the Russell deal.

Original Article by The Telegraph 

Fresh Turbulence tests markets

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A dramatic upswing in volatility is putting post-crisis financial markets to the test, as curbs on banks’ ability to take risks and an increase in technology-driven trading expose potential new cracks in the system.

While investors and traders say markets have become safer since the 2008 financial crisis – there is less leverage in the system and banks are better able to withstand shocks – they worry that the post-crisis rule book has reduced the market’s ability to absorb sharp spikes in buying and selling.

Case in point: last week’s sell-off in stocks and lower-rated bonds, which was attributed to a confluence of factors such as disappointing data, fears over global growth and anxiety over the impact of an eventual rise in U.S. interest rates. It was worsened by a lack of banks and market-makers able to step in and buy assets that were being dumped.

These worries were most keenly felt in the corporate bond market, which has been a virtual magnet over the past five years for investors in search of yield at a time of rock-bottom interest rates.

With the Federal Reserve laying the ground for higher rates, making parts of the bond market vulnerable to an investor stampede for the exits, volatile price swings are being exacerbated by the diminished ability of banks to carry securities on their balance sheet for trading.

So while post-crisis rules designed to make future taxpayer-funded bailouts less likely have limited banks’ ability to make risky bets on their own account, they have also constrained the basic market-making that can help cushion dramatic price moves.

Banks and dealers don’t have the risk appetite or the ability to commit more capital. … If everyone tries to get out (sell) at the same time, there could be a bottleneck that develops,” said Constantinos Antoniades, head of fixed income at trading platform Liquidnet.

“The volatility that we saw last week, I suspect, was just the tip of the iceberg.”

Issues Masked

The problem has been exacerbated by a surge in investor demand for high-yielding assets since 2009.

While banks and brokers’ holdings of U.S. corporate debt for market-making has slumped to 0.89 percent of total outstanding assets in 2014 from 2.5 percent in 2004, according to TABB Group data, the market itself has ballooned some 53 percent since 2008, to around $10 trillion.

Asset-management firm BlackRock warned in September that the trading environment for corporate bonds was “broken” and called for a greater variety of trading venues and product types.

“Liquidity has dried up, especially when you’re looking at the fixed income market,” said Matthew Coupe, director of regulation and market structure at NICE Actimize.

In the U.S. high-yield bond market, daily trading volume averaged $6.9 billion in 2014 through the end of September, up 23.3 percent from last year’s pace, according to the Securities Industry and Financial Markets Association.

Meanwhile, junk bond inventory at U.S. primary dealers has averaged just over $7 billion over the last 18 months, New York Federal Reserve data shows, and briefly dropped below $5 billion earlier this summer.

“The major money center banks, which were the major market makers in high-grade and high-yield bonds, now with their new capital rules are no longer supporting bond transactions the way they did in the past,” said James Swanson, chief investment strategist at MFS Investment Management in Boston. “So as the market is rising, it works pretty well, but if there is a major influx of sell orders, it is really going to test the market.”

Structural issues have also been flagged in other markets, such as equities, where trading is more automated than in bonds and where technology has stepped in to fill the gap left by traditional market-makers.

The rise of high-speed electronic traders and of numerous anonymous trading venues known as “dark pools” – partly due to regulations designed to increase competition among exchanges and lower trading costs – have brought their own problems. Analysts cite a lack of transparency and the fragmentation of trading across several venues that has added to complexity.

“It’s not the post-crisis market structure that is triggering these price movements, but on the other hand it can make them worse,” said Frederic Ponzo, managing partner at consultancy GreySparks Partners.

No Nostalgia

That does not mean there is nostalgia for the pre-2008 days. Then, banks’ market-making capacity was found wanting when big risky bets and a boom in complex debt securities went sour.

Instead, traders say, the emphasis should be on finding ways to better connect buyers and sellers of assets and encouraging other intermediaries to put up more capital despite the risks.

In the bond market, that may mean a drive for more technology, a greater variety of venues and more product standardization, as recommended by BlackRock. In equities, regulators are stepping up scrutiny of market structure and in Europe have proposed capping some dark-pool trading.

For now, though, the sense is that there will be more bumpy rides to come even if the worst of the 2008 crisis is behind us.

“There have been many suggestions and recommendations on how markets should change,” said Niall Cameron, HSBC’s head of markets for Europe, the Middle East and Africa.

“But I think that market players will have to get used to seeing these short-term, sharp bursts of volatility based on news that ordinarily would not have created so much activity.”

Original article by Reuters – to read click here

Market Movements October

8cab5050-5d6d-484f-8fbe-9a8b64198fc4-620x411The last week in the financial markets has been the most turbulent we have seen in 2014 hitting the lowest point in the last 15 months. This has left many investors questioning whats next and how will it affect them.

Below you will find a summary report from Close Brother Asset Management on the weeks event and their view of what investors can expect next. It is a good summary of current markets, investors worries and possible outcomes moving forwards.

Markets have been extremely volatile, and are now in a clear corrective phase

  • The US market, the only major market in positive territory year to date (as of 15/10/2014), is now down about 7.3% from its mid-September peak
  • The UK market is now down 8.0% year to date
  • Bond yields which have been declining all year, saw another sharp decline yesterday, with the US Treasury ending the day just over 2%
  • The 10 year gilt is up over 10% in price terms. Or looked at another way, the US and UK 10 year have experienced roughly a 35% move lower in yields
  • The VIX (measure of volatility) has risen to a recent high of 26 (highest level since 2012) and hit a high of 32 intraday yesterday

Investors are worried about:

  • Slowing global growth with clear weakness and signs of deceleration in parts Emerging Markets (commodity producers), Europe and Japan
  • Continued sharp declines in inflation, more recently triggered by lower commodity prices. The spectre of more widespread deflation is a concern. Brent oil has dropped 27% since peaking in June.
  • Rising dollar and concerns about its effect on US overseas earnings
  • Fed QE exit and the spectre of rate rises next year..
  • ISIS and Ebola-we do not think these are investment issues, but nonetheless they add to the uncertainty

We think:

  • This is another correction in the bull market that started in mid-2009, not the start of a bear market
  • Growth is moderating and the economic volatility is all part of our view that we are in the midst of a weak and elongated recovery cycle, but we are not entering a recession
  • Lower commodity prices act as stimulant to demand as the world’s largest economies are net commodity importers
  • Dollar strength does not hurt the US too much (exports 15% of GDP) and helps Europe and Japan as relative export oriented economies (circa 35% of GDP)
  • Central Banks remain accommodative and, if anything, global growth concerns might prompt further easing in Europe and more dovish comments about rates rise from Yellen in the US
  • The earnings outlook remains challenging and stock selection is critical, however we can see attractive earnings selectively and value in shares we own and may add to
  • The correction in bond markets has been exacerbated by technical issues and amplified by margin calls

What are we doing

  • We remain judicious long-term buyers. We are value investors and are looking to selectively add to shares where we see value
  • We are patient and are moving cautiously as we don’t want to be in front of a market that may correct further
  • We are multi asset class investors so our portfolios in a correction benefit from diversification –we are not 100% in equities.
  • We have some cash in portfolios which we will deploy as and when the dust settles or selectively in names where value has emerged
  • From an equity asset allocation perspective, our relative positioning is in:
  • Quality global franchises with high dividend yields (these are excellent long term sources of growth and income for clients)
  • UK companies that benefit from domestic recovery and a stronger dollar
  • The US market where we continue to like old technology and health care and select consumer franchise shares, and believe we will benefit from dollar strength
  • More recently have added to Japan on a hedged basis (the lower yen translates directly into better earnings)
  • Underweight and cautious on Europe for obvious reasons
Capital Wealth Partners Limited is a company registered in England and Wales and are authorised and regulated by the Financial Conduct Authority.