May 2021 - Lawsons Equity

Market Update

21st – 28th May 2021

Equities in Europe continued to support ultra-easy monetary policy and reports on a massive US fiscal spending plan. In local currency terms, the pan-European STOXX Europe 600 Index ended the week up 1.02%. France’s CAC 40 gained 1.53%, Germany’s Xetra DAX Index added 0.53%, and Italy’s FTSE MIB Index advanced 0.78%. The UK’s FTSE 100 Index ended roughly flat, in part reflecting the UK pound’s appreciation versus the U.S. dollar. The reopening of the economy and comments from Bank of England (BoE) policymaker Gertjan Vlieghe, who said the central bank could increase interest rates in the first half of next year, helped the currency rise for a fifth week in a row.

Core eurozone bond yields eased. Germany’s 10-year bund rallied early in the week, supported by pacifist comments from European Central Bank policymakers, who said they saw no evidence of sustained inflationary pressure, and that ending emergency bond purchases would be premature. Yields abruptly rose toward the end of the week as U.S. Treasury yields dropped. Bond yields in peripheral European markets largely tracked those in the core. UK gilt yields were broadly flat after an unstable week. They followed core markets lower early on, but increased sharply after Vlieghe’s remarks,

Due to differences in wages and immigration, Switzerland abandoned talks on a framework trade agreement with the European Union (EU) that would order access to the single market. The end of the seven-year negotiations means existing treaties with the bloc’s fourth largest trading partner could eventually expire.

US Equities recorded solid gains for the week, bringing the large-cap S&P 500 Index to within roughly 0.5% of the all-time intraday high it established on May 7, and leaving it with a small gain for the month. The technology-heavy Nasdaq Composite and small-cap Russell 2000 indexes performed best. Growth shares easily outperformed their value counterparts; Facebook and Google parent Alphabet helped communication services stocks outperform within the S&P 500, and a rebound in Tesla boosted consumer discretionary shares. The light trading volumes came in advance of the long Memorial Day weekend, with US markets scheduled to close today (Monday, May 31).

Fixed income investors appeared to be reassured by the Fed officials’ comments, with the yield on the benchmark 10-year U.S. Treasury note decreasing over the week. (Bond prices and yields move in opposite directions.) The broad municipal bond market posted positive returns throughout most of the week.

Japan’s stock markets registered a gain for the week, with the Nikkei 225 Index rising 2.94% and the broader TOPIX Index up 2.24%. Signs Japan was speeding up its COVID-19 vaccine rollout were supportive of sentiment. The yield on the 10-year Japanese government bond was broadly unchanged at 0.08%, while the yen weakened notably to around JPY 109.82 against the U.S. dollar.

Chinese equities increased strongly, with both the CSI 300 Index and Shanghai Composite Index posting the best weekly gain in more than three months, according to Reuters. In an attempt to reduce financial risks, policymakers assured zero tolerance for commodity speculation and further cracked down on cryptocurrency mining. Separately, Chinese regulators turned down applications to issue RMB 154 billion of asset-backed securities from various companies, including fintech company Ant Group, according to domestic news portal Sina.com. The amount was twice the amount rejected in 2020, and reflects the government’s renewed focus on curbing financial risks. In credit markets, the yield on the 10-year sovereign bond ended the week at 3.09%.

Last week, witnessed oil, gold, copper, tin, silver and nickel all higher. Gold rose 7.7% in May based on the front month, when the price settled at $1,905.30 an ounce on Friday. That was up 1.3% for the week. Gold prices have risen by nearly $200 an ounce in the past two months, and are up $220 since its 2021 lows in March. It jumped $130 an ounce in May alone.

Oil prices inched higher on Friday, with Brent near $70 a barrel. Brent rose 0.27%, to settle at $69.65 a barrel, but US West Texas Intermediate (WTI) crude dropped 0.36%, to settle $66.61 a barrel. Brent and WTI rose 3.5% and 4.3% respectively in May. Based on Friday’s close for US investors. Brent will trade normally today (Monday).

Lawsons Equity – Financial Advisors Malta

Lawsons Equity Limited is a company registered in Malta with company number C49564 and Licenced by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to provide Investment Services under the Investment Services Act, 1994. Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries click here

Why is it important to talk about money?

Talk about money – The last 18 months have been tough for many, and unfortunately millions of people’s finances have been affected by Covid-19. Everyone’s situation is different, some have to tighten their spending a little, while many have unfortunately found themselves unemployed, unable to pay their bills, and in a tricky situation. Although one thing remains the same: talking to those close to you about money is crucial to avoid your financial problems getting out of control.

Why is it important to talk about money?

University College London surveyed 15,000 people in 2015. The results showed that people are seven times more likely to tell a stranger intimate details about their bedroom activities than to discuss how much money they earn. Crazy, huh?

This may be unsurprising, as it has historically been considered rude to talk about money. Although attitudes are slowly changing.

As a company in which we ensure that people have control over their finances, we are the ones who have to reinforce the importance of talking about money. Here are just three reasons why we feel it is so important:

1) To teach financial literacy to younger generations

Studies have shown that the earlier a child is introduced to the responsibilities of money, the better prepared he or she will be to manage it in later life. Earning money and knowing how to budget and save are imperial life skills that can and should be taught from an early age.

This could start by being transparent about your family’s financial situation, allowing children to do mini jobs to earn pocket money, or introducing them to investing and allowing them to watch their own pot of money grow. There are many things you can do to help ensure money isn’t a source of stress for your children as they become adults.

2) To improve our mental health

Financial worries can become a burden on our mental health and lead to survivor mental illness if you do not ask for help when needed. Do not bury your head in the sand. Financial problems do not disappear. It is important to address financial challenges directly by talking to the right people and asking for support.

It can be an empowering and emotionally rewarding experience. The first people to whom you should turn could be a partner, family member or close friend. If you do not have this support network, there are many specialist organisations with whom you can speak in confidence and free of charge.

3) To make better financial decisions

The more honest you are with yourself and your loved ones, the better the final result will be. For example, someone who is ashamed of a poor credit rating can withhold this information from their partner. Until it comes to a joint mortgage application or joint account that could be rejected, but if they had spoken about it earlier, they could have taken steps to overcome the credit difficulties before they want to buy a home.

There are many ways in which you can make better decisions if you have all the information you can give. But it first requires you to be open and honest about your situation and be ready to tackle it!

How to talk about money

Ready to talk finances with your family or partner? Here are a few tips from us:

Prepare for the conversation

Time – The perfect time to talk about money is probably not after work or when bathing the kids. So choose wisely.

Don’t pick a moment when one of you is stressed, tired or in a rush. Instead, choose a moment when you’re both in a chilled environment, feeling positive and have energy. Maybe a Saturday or Sunday over lunch?

Location – While you are encouraged to talk openly about money with your family or partner, you may not feel so comfortable talking about it in the presence of others. So make sure you are at home alone, or perhaps walking or in a quiet area of a cafe.

If you do not live together, you might also want to hold your conversation on “neutral territory” – i.e. not at one of your homes. This can help calm both minds and create a neutral atmosphere.

Talking points or goals – Have you ever left a meeting feeling like it was a complete waste of time? Poor meetings are often the result of unclear agendas and poorly defined goals.

If there are several factors you want to talk about, you should split them into several conversations. In this way, the “agenda” and goals of each discussion should be crystal clear, and give you more time to have a proper conversation. Try not to finish the conversation until your goals are met, or re-schedule some time to discuss it further.

Start the conversation

Once you are clear of what you want to get out of the conversation and have an idea of where and when the best time is to have it, it is time to start.

Bear in mind everyone’s different. Some will be fine talking about money at the drop of a hat, while others might prefer some warning. Suddenly asking “What’s your credit score?” as you’re having dinner after work may not result in the answer you were expecting. If you believe the other person would appreciate a heads-up – and we dare say that many will – think about introducing the idea of talking about money gently and agreeing on a time to discuss it.

However, sometimes waiting for what can be perceived as an “important chat” can cause much anxiety. So you may decide it’s the best approach to just come out and say it. That’s fine too, so long as you do it at the appropriate time and location (as explained above).

It’s likely you’ll know the other person well, so use your judgment to decide the best way forward. Remember:

Take turns to speak
Be honest
Be aware of emotions
Agree any further actions

Consider writing down any actions that you need to take before the conversation concludes. This might include:

Researching a particular question or topic
Calling a bank or loan provider
Downloading a credit report
Gathering relevant paperwork
Seeking help from a support organisation

How to talk to partner about money

Talking to your partner about money can be part of a healthy relationship. Regularly discussing your finances can help you deal with minor problems before they become bigger ones. So try to find time to make it part of your routine, perhaps agreeing to talk at brunch or on a long walk monthly.

If you are in a more urgent situation or requiring a “bigger” discussion, consider following the steps mentioned above. The advantage of knowing someone well is you will probably have a clear understanding, which will allow you to avoid the emotional pitfalls that can get in the way of a productive conversation.

Talk about your finances and don’t be afraid to seek help.

Money can be a confusing and complex area at the best times, and it can be traumatic when you have financial difficulties. In these situations, sometimes talking about money is not enough. Further advice is needed, or perhaps you need a neutral ear for advice. To schedule a no obligation initial consultation with one of our financial advisors, click here.

Lawsons Equity – Financial Advisors Malta

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.

The value of investments and income from them may go down. You may not get back the original amount invested

Lawsons Equity Limited is a company registered in Malta with company number C49564 and licenced by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to provide Investment Services under the Investment Services Act, 1994.

Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries click here

In the United Kingdom, Lawsons Equity Limited is deemed authorised and regulated by the Financial Conduct Authority. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.

Financial planning post Brexit. How does this impact me?

Now that Brexit is here, EU-resident Britons with UK bank accounts, investments, insurance policies, or a UK-based financial adviser may be restricted in what they can do.

In these times of extensive restrictions and lockdowns, our worlds have become much smaller. Whether or not this will have a long-term impact on your lifestyle, travel and shopping habits as restrictions increase will be a personal matter. With Brexit now in full swing, British citizens living in the EU have valid reasons to “think locally” when it comes to financial plans.

Just as British citizens lost automatic freedom of movement in the EU when Brexit took effect on 1 January, many British financial firms lost the right to offer banking and investment services within the EU.

If you reside in Malta, Spain, Portugal, France, Cyprus or any other EU state, but continue to use a UK bank account, other financial products or a UK financial adviser, ensure you check where you and your money stand.

British financial services and Brexit.

Prior to Brexit, UK firms providing financial services to Britons living in the EU could legally do so through ‘passporting’ arrangements. This meant UK providers– imposed by the Financial Conduct Authority (FCA)– were dedicated to meet the same minimum requirements and consumer protections for EU residents as other EU states.

Now that the UK (and the FCA) are free to set their own policies, the EU has no guarantee that UK firms will meet their requirements. On 1 January, the EU withdrew passporting rights for UK firms– including banks, insurance companies, investment providers and financial advisers.

Presently, some could even break the law by dealing with EU residents.

Does this impact all British financial firms?

This depends on many factors, including how a company is structured and where it is located. Those with headquarters in an EU country can retain their passporting licence and continue to operate as before.

Wholly UK-based firms who want to support EU-resident clients will likely need to restructure and form agreements with the financial regulators for each EU/EEA country they operate in. This is a highly intricate, costly, and time-consuming process, which is not an attractive option for all.

Discussions on financial services are ongoing, so it is feasible that the UK and the EU could still reach an agreement in this area. Some firms may be holding out for this before going through the potentially unneeded expense of restructuring. Others have already withdrawn from the EU markets.

Some major UK banks have notified EU-based clients that they can’t provide them with services after Brexit, and have closed their accounts. Other providers have maintained accounts/policies suspended, but open activity, or are allowing them to continue until the end of their term.

How could this impact you?

If you have a British bank account, insurance policy, investment or other financial product, and your provider has not gotten in touch with you about limited services, ask them what arrangements they have in place for your country of residence.

If your account has not been closed, has it been frozen?

In several cases, while you may retain existing accounts and make withdrawals as an EU resident, you may be limited from adding or moving funds or renewing policies. You may also be unable to apply for new services, like term deposits, bonds, foreign currency management, loans, credit cards and mortgages.

Check if they have the authority to continue to support you as an EU resident if you still use a financial adviser from the UK. In addition to the legal implications and whether you are protected if things go wrong, some financial institutions have stopped accepting instructions from UK (unregulated) providers. If you hold EU-based investments, your planning options can be significantly limited with a UK adviser.

Financial planning after Brexit

Regardless of whether the problem of financial services does not impact you, there are other key benefits in thinking more locally for your finances.

Are you still holding on to UK investments and savings?

Now that UK assets are no longer EU/EA assets, they could potentially attract a higher tax bill within the EU. ISAs are also taxable for non-UK residents in your country of residence.

Do you own UK property?

Don’t forget: EU residents are still in the firing line for UK stamp duty and capital gains tax.

Residents in Malta, Cyprus, Spain, Portugal and France can access opportunities that offer better tax-efficiency for capital alongside other potential benefits, so make sure you review your options.

What about pensions in the UK?

This is not so simple. If necessary in your host country, you might be better off leaving UK pensions in the UK and drawing income. Brexit does not impact the ability to deposit UK pension income into an EU account. It will always be paid in sterling, so the value could be impacted by exchange rates and conversion costs.

Look into whether it might be more advantageous for you to transfer funds from the UK into a tax-efficient structure for your country of residence. This could also unlock currency flexibility and estate planning benefits, but be sure to seek expert, regulated advice to do what is right for you.

Lawsons Equity – Financial Advisors Malta

Considered that Brexit has brought such a seismic transformation in the landscape, it has never been more crucial to ensure that your financial plans are suitable and compliant for your life abroad. Speak to a Lawsons Equity advisor today. We can help you take advantage of well-suited opportunities there are and secure financial comfort for you and your family.

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.

The value of investments and income from them may go down. You may not get back the original amount invested

Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries click here

Market Update 21/05/21

Equities in Europe rose on signs that the economy is rebounding as restrictions instituted to control the coronavirus’s spread began to ease. However, worries about inflation curbed gains. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 0.43% higher. Major indexes were mixed: Italy’s FTSE MIB Index advanced, while Germany’s Xetra DAX Index and France’s CAC 40 Index were little changed. The UK’s FTSE 100 Index fell 0.36%, as strong economic data lifted the British pound versus the U.S. dollar.

Core eurozone bond yields ended higher on expectations that the European Central Bank (ECB) could delay its bond purchases. Peripheral eurozone bond yields fell. Uncertainties over Italy’s economic reform plans and the potential slowing of ECB bond purchases initially drove yields higher, but markets began to stabilise, and peripheral yields ended lower. UK gilt yields fell on concerns about the spread of a new coronavirus strain and its potential to delay the full reopening of the UK economy.

Eurozone business activity accelerated at the fastest pace in three years in May, as virus containment measures eased, a survey of purchasing managers by IHS Markit showed. The flash composite PMI reached 56.9 in May, an improvement from the 53.8 registered in the preceding month. The services sector index climbed to 55.1 from 50.5.

US Stocks posted mixed results in a volatile week of trading, with the large-cap S&P 500 Index ending modestly lower and the tech-heavy Nasdaq Composite Index gaining a little ground. These mixed results likely reflect strength in the U.S. economy, as well as concerns about inflation and the timing of when the Federal Reserve might begin to rein in its accommodative policies. Within the S&P 500, the health care posted the largest gain. Energy and industrials lost ground.

Treasury yields were roughly unchanged for the week. Wednesday’s sharp sell-off in cryptocurrencies sparked a bid for Treasuries. However, yields soon increased following the release of the FOMC’s April meeting minutes, which led investors to pull forward their expected timeline for rate hikes. (Bond prices and yields move in opposite directions.) Municipal bonds recorded modestly positive returns through most of the week.

Japan’s stock markets finished the week higher, with the Nikkei 225 Index returning 0.83% and the broader TOPIX Index up 1.13%. Economic data were mixed, with Japan’s gross domestic product shrinking more than expected in the first quarter. Export growth in April was strong, and manufacturers’ business confidence rose to its highest level since late 2018 in May. The yield on the 10-year Japanese government bond fell slightly to 0.08%, while the yen strengthened, finishing the week at around JPY 108.66 against the U.S. dollar.

Chinese stocks recorded a mixed week. The benchmark Shanghai Composite Index shed 0.1%, while the large-cap CSI 300 Index, whose growth stocks have fallen in recent weeks, added 0.5%. In the fixed income market, yields on Chinese bonds fell following disappointing April economic data. In currency trading, the Renminbi ended the week roughly unchanged versus the U.S. dollar. The renminbi has strengthened since early April against the dollar, driven by China’s widening current account surplus, foreign direct investment, and foreign portfolio investment in Chinese bonds and stocks. The Renminbi’s recent appreciation has pushed the official trade-weighted index—which measures the Chinese currency’s value against a basket of 24 major currencies—close to its 2018 high.

In commodities, Gold ended the week at a settlement of $1,876.70, up 2.1% for the week. The metal rose $5.20 on Friday, or 0.3%. West Texas Intermediate crude moved higher again on Friday, as did Brent Futures, but still shed value over the week. Brent Futures settled at $66.44. WTI rose 2.7% to settle at $63.58. That was a fall of 2.7% for the week, and came as the number of rigs drilling for oil in the US again rose.

Lawsons Equity – Financial Advisors Malta

How are your savings protected? Bank deposit schemes explained

Bank deposit guarantee schemes in the UK and the EU

European banks offer a deposit guarantee of up to EUR100,000 (₤ 85,000 in the UK). In Jersey, Guernsey, and Isle of Man, compensation is limited to ₤ 50,000. When you have worked hard to accumulate your savings, it is essential to know where you stand if the financial institution holding your money fails. For peace of mind, you ought to identify what investor protection you have with each of the financial institutions you use – banks, investment firms, insurance companies, etc. – in the event of institutional failure. If required, take measures to improve your position.

What is the protection banks offer?

EU banks

Under an EU Directive, each EU country offers a bank deposit guarantee of EUR100,000. Your national deposit guarantee scheme will reimburse your savings up to the limit of EUR100,000 if a bank fails.

If your bank fails, savings above the EUR100,000 could be lost. You may receive further money after any asset distribution as part of the insolvency procedure, but this would depend on the situation of the bank at the time. Deposits are covered per depositor, so couples with joint accounts have EUR200,000 protection.

Bear in mind, the guarantee is per banking group, not per bank account, or even per bank. Some banks with various names form part of the same group, so you have to be cautious.

Under specific circumstances (for example, after selling a property), you may be entitled to higher protection for temporary high balances. You have to check at your local scheme to ascertain what the higher guarantee is and how long it is considered “temporary” (for example, in France and Spain it is only three months).

Savings – National deposit guarantee schemes.

Malta: Depositor Compensation Scheme.

Cyprus: Deposit Guarantee and Resolution of Credit and Other Institutions Scheme (DGS).

Spain: Fundo de Garantia de Depósitos de Entidades de Crédito ( FGD).

France: Fonds de Garantie des Dépôts et de Résolution ( FGDR).

Portugal: Fundo de Garantia de Depósitos ( FGD).

Timetable for savings protection payments in the EU

France and Cyprus aim to make the amount payable within 7 working days.

In Spain and Portugal, the time frame decreased from 15 working days to 10 from 1 January 2021, and will be 7 from 2024.

UK Banks

In the United Kingdom, accounts in regulated banks are safeguarded by the Financial Services Compensation Scheme (FSCS). The amount protected should be the same as provided in the EU and is currently ₤ 85,000.

As in Europe, protection is per depositor (so accounts in joint names are protected up to ₤ 170,000), and per banking institution. An institution is not the same as a bank; Halifax and Bank of Scotland, as an example, belong to the same institution.

Timing of savings protection payments in the UK

The FSCS aims to pay compensation within seven days of a bank or building society failing, though more complex cases will take longer.

The impact of Brexit.

According to the FSCS website, there is currently no plan to change the ₤ 85,000 limit post Brexit. It also explains its protection “is not dependent upon the depositor’s place of residence, but where the bank, building society or credit union holds the deposit”.

Nothing changes for UK nationals living in the EU with savings in a UK-authorised bank.

Since January 1, 2021, the protection of deposits held in EU/EA branches of UK firms has now been covered by the local EEA deposit guarantee scheme in that country, and is no longer covered by the FSCS.

UK offshore centres

Banks in the Channel Islands and Isle of Man are not covered by the UK scheme, even if they are divisions of UK banks. Instead, you would have to rely on their local guarantee schemes, which offer less protection.

Jersey and Guernsey

The limit to depositor compensation schemes in Jersey and Guernsey is ₤ 50,000, capped at ₤ 100 million in a five-year period. They intend to pay compensation within three months of a bank failure.

Isle of Man

The Isle of Man’s Depositors’ Compensation Scheme (DCS) offers compensation of up to ₤ 50,000 for covered banks.

There is no time limit for payment of compensation. The amount of compensation paid and the timing of payment will depend on the size, asset quality, and profile of the failed bank, and the amount of funding contributed.

There is no standing fund for the DCS. Contributions fund and required if.it from covered banks which participate in the DCS and the Isle of Man Treasury, capped at ₤ 200 million for a 10-year period.

Luxembourg’s ‘Triangle of Security’

Luxembourg offers effective protection for life assurance policy holders. The foundation of its ‘Triangle of Security’ investor protection program is the legal requirement that an independent custodian bank must hold all clients’ assets approved by the state regulator.

The bank is required to lend securities to its clients – investment funds, shares, bonds, etc. – so that they are off the balance sheet. These securities remain in segregated client accounts if the bank fails. 100% of the policyholder’s securities are therefore protected.

This does not include deposits in cash, cash held in monetary funds is treated as securities and is therefore protected.

Regardless, you should always make sure that you have adequate diversification throughout different investment assets. This decreases risk and increases the potential for enhanced returns.

As always, your savings and investment choices should be based on your personal goals, circumstances, time horizon and risk profile.

Protection of your investments and savings

Many savers with more substantial deposits have spread them over more than one bank. It results in more paperwork, but is worth it for peace of mind. Others have chosen to move capital into arrangements which offer a higher level of investor protection than banks can offer.

If you have an investment bond issued by a Luxembourg-regulated insurance company, your investment assets will be protected if the insurance company fails.

Lawsons Equity Financial Advisors Malta

Talk to Lawsons Equity for tailored advice on asset protection, effective diversification and tax-efficient investment arrangements that are available to you in your country of residence. To schedule a no obligation initial consultation with one of our financial advisors, click here.

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.

The value of investments and income from them may go down. You may not get back the original amount invested.

Lawsons Equity Limited is a company registered in Malta with company number C49564 and licensed by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to offer Investment Services under the Investment Services Act, 1994.

Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries, click here.

Market Update 17/05/21

Europe’s shares fell with global markets amid signs of accelerating inflation, sparking fears that interest rates could rise. In terms of local currency, the pan-European STOXX Europe 600 Index ended the week 0.54% lower. Major indexes were mixed. Germany’s Xetra DAX and France’s CAC 40 were little changed, but Italy’s FTSE MIB rose 0.63%. The UK’s FTSE 100 pulled back 1.21%, in part because the British pound appreciated relative to the U.S. dollar after local election victories for the ruling Conservative Party. The FTSE 100 index tends to fall when the pound rises, because many companies in the index are multinationals that generate a significant proportion of their revenues abroad.

Bond yields in the Eurozone rose. A higher-than-expected inflation print in the U.S. triggered a sell-off in high-quality government bonds, causing core yields to rise in tandem with U.S. Treasury yields. Peripheral eurozone bonds largely tracked the moves in core markets. Fears of slowing bond purchases by the European Central Bank (ECB) also led to higher yields. UK gilt yields also tracked U.S. Treasury yields amid global weakness in government bonds.

US stocks slipped back from record highs as investors showed stark signs of higher inflation, but a late rally moderated the week’s decline. Tesla’s weakness weighed in particular on consumer discretionary shares, and Elon Musk’s announcement that the electric car maker would no longer accept Bitcoin as a payment because of its carbon footprint has led to a sell-off in the cryptocurrency. At its low point on Wednesday, the technology-heavy Nasdaq Composite index was down roughly 8.5% from its intraday April 29 peak, still above the widely accepted 10% threshold for a correction.

The bond market appeared to take its cue from the Fed, with the yield on the benchmark 10-year U.S. Treasury note increasing, but staying well below its late-March highs. (Bond prices and yields move in opposite directions.) Municipal bonds outperformed Treasuries through most of the week, but posted negative returns.

Japan’s stock markets recorded significant losses for the week amid a bout of volatility after an unexpectedly sharp rise in the US consumer price index. Accelerating coronavirus infection rates and the announcement that a state of emergency will be declared in three more prefectures also dampened risk sentiment. The Nikkei 225 fell 4.34%, while the broader TOPIX Index was down 2.57%. Risk-off sentiment led the 10-year Japanese government bond yield to rise to 0.09%, while the yen weakened slightly, finishing the week at around JPY 109.41 against the U.S. dollar.

Chinese stocks rose sharply for the week. The benchmark Shanghai Stock Exchange Composite Index gained 2.1%, while the large-cap CSI 300 Index advanced 2.3%. The yield on China’s sovereign 10-year bond ended unchanged at 3.17% after a week of mixed economic data. In April, China reported net inflows of $9 billion into the country’s government bonds. Beijing is keen to attract foreign investment into its domestic green bond market, used to finance renewable energy and other green projects. In currency trading, the Renminbi gained 0.3% against the U.S. dollar, closing at 6.434 per dollar.

In commodities, Gold settled at $18.38 a tonne, up $14.10 an ounce or 0.8%. That left the metal hardly changed from the previous week’s close. Silver rose 1.5% on Friday to end at $27.65 a tonne. Oil was weaker, on Thursday but bounced higher on Friday to end up 0.7% at $65.37 for West Texas Intermediate. Brent also edged higher, settling at $68.71. WTI was up around 1% for the week, Brent by 0.8%.

Will your UK pensions fall into the lifetime allowance tax trap?

If you have several pensions in the UK, have been saving for many years or have a generous company pension, you could be at a higher risk of 25% or 55% lifetime allowance tax charges after recent measures.

One key outcome of the 2021 UK budget was that the lifetime allowance for pensions (LTA) was frozen at its existing level for at least the next five years.

This measure alone is estimated to net the Treasury approximately ₤ 990 million by 2026, pushing an extra 10,000 people over the threshold.

With LTA tax charges of up to 55%, make sure you are not caught unprepared.

What is the lifetime allowance?

Since 2006, the UK government has capped how much money you can hold in combined pension benefits without paying additional tax. Originally ₤ 1.5 million, the LTA peaked in 2011 at ₤ 1.8 million before progressively dropping to ₤ 1 million in 2016. Tracking inflation since then, the March 2021 Budget cancelled this year’s scheduled increase, freezing the LTA at its current level of ₤ 1,073,100 until at least 2026.

Who is impacted by the lifetime allowance?

While the current lifetime allowance of ₤1,073,100 sounds high, it does not just catch the super-rich.

All UK pension benefits outside the State Pension are taken into consideration, including everything built up over a working lifetime. After many years of pension contributions, compounding interest, investment growth and tax relief, the limit may be closer than you think.

For ‘final salary’ (defined benefit) pension schemes, the typical measure of value is 20x the annual income due. In general, this will mean that people with pensions worth ₤53,655+ a year will be impacted today.

What are the lifetime allowance charges?

As soon as the total pension funds exceed the allowance limit, an additional tax is payable when you access your money, technically called a “benefit crystallisation event”.

How much you pay out depends on the way funds are taken out – the rates are:

55% for lump sums;

25% for income or transfers to an overseas pension.

At best, the cost of being in excess of the LTA can be a quarter of your money, at worst over half.

Being a non-UK resident does not provide any protection. Typically, under the double tax agreement, residents of countries like Portugal, Spain and France are not liable for UK taxes on British pensions (except government service pensions).

For anyone who exceeds the allowance, these rules do not apply: the LTA tax is first applied in the UK and can’t be claimed back.

How do you check your LTA position?

Calculating how much of your allowance you have used is not always simple, particularly for final salary pensions, so you ought to check your position with your provider or pension adviser. HM Revenue & Customs (HMRC) will first test your allowance status when you start withdrawing your pension, then each time you access money and when you turn 75. All lump sums paid to your beneficiaries will also be subject to the LTA test and subsequent tax charges if you die before the age of 75.

How can you safeguard your pensions from the lifetime allowance?

You could obtain a higher limit by applying for LTA ‘protection’ from HMRC, but this usually has stringent conditions attached, so take advice.

Expats have the option of transferring UK pension funds to a Qualifying Recognised Overseas Pension Scheme (QROPS).

You will not be taxed on the transfer if you transfer one or more UK pensions to a QROPS and your total benefits are below ₤ 1.073 million. However, make sure the QROPS is within the European Economic Area (EEA), otherwise you would still lose 25% through the ‘overseas transfer charge’.

When in a QROPS, funds are out of reach of LTA charges, no matter how much you have or how you access it. A suitable QROPS can also offer tax-efficiency, currency flexibility and estate planning benefits.

An alternative option is to take your UK pension as cash and reinvest it in a tax-efficient, compliant setup in your country of residence. Again, this can unlock various other benefits not usually offered with UK pensions.

Evaluating your pension options.

Prior to making major pension arrangements, it is important to take regulated, customised advice to avoid pension fraud and to find the most appropriate strategy for you.

What if you are currently over the limit?

Although you would trigger an immediate 25% LTA charge if you transferred to a QROPS, the funds become immune to further charges.

If you instead transferred to a UK scheme, like a Self-Invested Personal Pension (SIPP), you would not trigger immediate taxation, but the funds would remain liable, with future charges increasing as funds increased.

The 25% or 55% LTA charges would then become payable any time you take benefits, and also apply to any beneficiaries inheriting the pension.

If you are over or close to the LTA threshold, think about acting sooner rather than later. Your pension funds should continue to grow while the lifetime allowance stays frozen, so you could possibly avoid unneeded taxation by taking steps now.

Even if your pension benefits are within the allowance or you are not yet ready to access them, it is a good idea to assess your situation.

Lawsons Equity can help you explore your options and take advantage of tax-efficient opportunities to secure a comfortable retirement.

To schedule a no obligation initial consultation with one of our financial advisors, click here.

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.

Lawsons Equity – Financial Advisors Malta

The value of investments and income from them may go down. You may not get back the original invested amount.

Lawsons Equity Limited is a company registered in Malta with company number C49564 and licensed by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to provide Investment Services under the Investment Services Act, 1994.

Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries, click here.

In the United Kingdom, Lawsons Equity Limited is deemed authorised and regulated by the Financial Conduct Authority. Details of the Temporary Permissions Regime, which allows EEA-based.

Weekly Market Update 9/5/21

Equities in Europe rose on stronger-than-expected earnings results and growing confidence in an economic recovery. In local currency terms, the pan-European STOXX Europe 600 Index finished the week 1.72% higher. The French and German stock indexes climbed by more than 1.5%. Italy’s FTSE MIB Index added 1.95%. The UK’s FTSE 100 Index gained 2.29%.

Core bond yields of the Eurozone fell in the first half of the week on underwhelming US manufacturing data. Yields steadied following a European Central Bank policymaker implied that the institution’s bond purchases could slow down in June. The yields on peripheral eurozone government bonds largely rose. They initially tracked core markets lower, but Italian government bonds then sold off after reports surfaced the country would issue debt with 30-year maturity.

Skepticism over the timing of Italy’s recovery package also pushed peripheral yields higher. UK gilt yields fell, tracking early moves in core markets. The Bank of England then revised its forecast for 2021 UK economic growth to 7.25% from 5%, and said it planned to slow bond purchases, causing a momentary rise in yields.

The major US indexes generated mixed returns across a wide range as a Friday rally wiped out some losses early in the week. The narrowly focused Dow Jones Industrial Average fared best, although the technology-heavy Nasdaq Composite Index recorded its worst weekly decline in two months. Technology shares underperformed within the S&P 500 Index, along with consumer discretionary, utilities, and real estate shares.

The discouraging jobs data triggered a temporary but sharp decrease in Treasury yields on Friday morning, helping temporarily push the yield on the benchmark 10-year note to a two-month low before ending up lower for the week. (Bond prices and yields move in opposite directions.).

In a holiday-shortened week, Japanese equities at least temporarily disregarded worries about the coronavirus and associated restriction measures to record a gain.

The Nikkei 225 rose 1.89%, while the broader TOPIX Index finished 1.83% higher. (The market was closed for Golden Week for the first 3 trading days.) Investor confidence was supported by the prospects of a global economic recovery following better-than-expected U.S. data in recent weeks. The yen was broadly unchanged at just above JPY 109 against the U.S. dollar, while the yield on the 10-year Japanese government bond dropped to 0.08%.

Chinese stocks fell also in a holiday-shortened week. The large-cap CSI 300 Index fell 2.5% from the previous Friday, while the Shanghai Stock Exchange Composite Index shed 0.8%. Mainland markets resumed Thursday after being closed Monday through Wednesday for the Labor Day holiday. The yield on China’s 10-year sovereign bond declined three basis points to 3.17%.

In commodities, copper and iron ore hit new all-time highs on Friday as demand for both commodities continued to surge, especially from China. Gold settled higher as prices remained above $1,800 an ounce at week’s end for the first in three months. Gold closed up 0.9% or $1,560 to settle at $1,831 an ounce. Silver rose 6.1% last week after settling Friday at $27.477 an ounce.

US energy companies added oil and natural gas rigs for a second week in a row, as higher oil prices prompted more drillers to return to the field. Oil futures rose 2.1% last week for US West Texas crude, which ended up 0.3% on Friday at $64.90. Brent futures rose 2.7% for the week to settle at $68.28 a barrel.

Pension options for expats. Should I transfer my UK pensions abroad?

Should I transfer my UK pensions?

Broken down, British expats have the following options when managing existing UK pensions.

1: Leave the UK and retain your workplace or private pension with a UK provider

2: Transfer the UK pension funds into an International SIPP.

3: Transfer the UK pension funds into a Qualifying Recognised Overseas Pension Scheme (QROPS).

There are other choices and variations, of course, but typically the options come back to these. QROPS can allow people to take substantial benefits from their pension, including avoiding UK tax by transferring their pension into a QROPS.

While transferring to a QROPS can provide currency advantages, tax efficiency and flexibility in estate planning, to British expatriates, the question our advisers get frequently asked here at Lawsons Equity… is it right for everyone?

QROPS is widely thought about as the answer for UK Expats. It’s by no means a one-size-fits-all approach.

Qualifying recognised overseas pension schemes (QROPS) explained.

QROPS is a classification for international pension schemes that comply with HM Revenue & Customs (HMRC) regulations to receive transfers from UK-registered pension schemes.

Established in 2006, QROPS allows British expatriates to simplify their affairs by taking their pensions along with them. Schemes only make the HMRC list if they meet comparable conditions to UK pensions, like not being typically made available prior to the age of 55.

QROPS Qualifying Criteria: Is a QROPS suitable for you?

You may be eligible for a QROPS if you meet the following criteria:

You have a pension of any value (excluding state pensions).
You plan to live abroad or are currently living abroad.
You do not plan to return to the UK, or you will be out of the UK for at least 5 years.
You have not already bought an annuity.
If yours is a final salary scheme, the scheme should not be already in drawdown.

Qualifying recognised overseas pension schemes (QROPS) and tax efficiency.

At present, EU residents can transfer UK pensions tax-free to a QROPS-based EU/EAA scheme. Transferring to a QROPS outside the EU alliance will activate a 25% UK ‘overseas transfer charge’.

The UK budget on March 3rd 2021 did not include modifications to QROPS, so transfers to EU/EAA-based QROPS continue to be tax-free for EU residents at present.

Now that the UK has departed the EU alliance, this 25% tax charge could be extended to capture EU transfers in the future.

When in a QROPS, funds are protected from UK taxes on income and gains, and no longer count towards your lifetime pension allowance (LTA). If you are already over the limit when transferring, 25% of the excess is charged, but funds are immune from further lifetime allowance penalties.

Examining the lifetime allowance and overseas tax charge.

Once you start taking benefits in your country of residence, qualifying recognised overseas pension schemes (QROPS) funds only become taxable.

How QROPS in Malta are taxed.

Malta has a long reputation for economic and political stability. It is a full member of the EU and has double taxation agreements with many leading nations. Malta’s QROPS as a result offers all the benefits of offshore pension planning, without risk associated with some other financial centres.

The Malta Financial Services Authority regulates its QROPS, and offers 0% inheritance tax, up to 30% as a tax-free lump sum, and a range of investment possibilities. The island also offers ‘third party’ QROPS; allowing investors to live any place they wish.

How QROPS in Spain are taxed.

When taking or accessing qrops lump sums and income from the UK pension, the general Spanish income tax rates apply to residents of Spain. These vary regionally, but tend to start at between 18.5% and 21.5%, and rise to a top rate in between 45.5% (Madrid) and 54% (Comunidad Valenciana).

Residents of Spain can find alternative tax-efficient choices for the reinvestment of pension funds, so speak to a Lawsons Equity adviser to find the most appropriate approach for you.

How QROPS in France are taxed.

Usually, UK pension and QROPS income is taxable in France at the income tax scale rates. For 2021, these start at 11% from EUR10,085, peaking at 45% for income over EUR158,122 (3%/ 4% surcharges apply over EUR250,000/ EUR500,000).

Under certain conditions, it is at present possible to take your entire pension fund as lump sum and pay only 7.5% tax with an uncapped 10% allowance.

Pension income in France also attracts 9.1% social fees (7.4% for pension income under EUR2,000 per month/ EUR3,000 per couple), unless you have EU Form S1 or are not affiliated with the French health care system.

For French residents, the reinvestment of pension funds into a suitable guarantee, a specialised form of life assurance, in which the underlying investments do not attract tax in France, could be more advantageous than a QROPS.

How QROPS in Portugal are taxed.

Portuguese residents who access QROPS or British pension income will face progressive income tax rates of 14.5% to 48% in 2021, unless you have non-habitual residence status (NHR). Under NHR, QROPS/UK pensions are taxed at a flat rate of 10% in Portugal for the first ten years.

You can continue to receive tax-free QROPS and foreign pension income for the remainder of your ten-year NHR period if you qualified for NHR before the regulations changed in April 2020.

You could find alternative tax-efficient choices for reinvesting pension funds as a Portugal resident if you do not have NHR status or your term has expired.

Qualifying recognised overseas pension schemes and flexible access.

While pensions in the UK can be limiting, many QROPS allow you to take as much cash or income as you want, and whenever you want.

You could draw a higher income in early retirement when you are most active, and reduce it in later years. You could take a lump sum and preserve the rest for emergencies, or pass it on to your beneficiaries.

This flexibility also has more potential to exhaust your money – unlike a Defined Benefit “final salary” UK annuity or pension, which provides a guaranteed income for the rest of your life.

Qualifying recognised overseas pension schemes, diversification and investment choices.

Qualifying recognised overseas pension schemes usually offer more choices than pensions in the UK regarding how your cash is invested, and are not as overexposed to UK assets. You can choose a flexible investment plan in a range of funds that suits your situations, objectives, timeline and risk appetite.

Qualifying recognised overseas pension schemes and estate planning flexibility.

Many pensions in the United Kingdom are payable to your spouse only after death. QROPS offers the option to include other beneficiaries. Rather than passing away with you or your spouse, your pension wealth could be passed on to any identified beneficiary, even across generations.

QROPS might also offer some protection from UK inheritance tax when pension assets are passed on to non-UK resident beneficiaries, even though they might still be subject to local succession tax.

Qualifying recognised overseas pension schemes and multi-currencies choices.

While pensions in the UK only pay in sterling, several QROPS allow you to withdraw and invest funds in more than just one currency. This is a huge advantage for British citizens living abroad, as it removes currency conversion costs and minimises dependence on pound/euro exchange rates.

Qualifying recognised overseas pension schemes and freedoms from UK legislation.

Funds in a QROPS are no longer regulated by UK pension laws, and are typically protected from future adjustments to UK regulations.

Be warned that unless you have transferred before 9 March 2017, you might continue to be subject to UK regulation and taxation if you move outside the EEA within five UK tax years of the transfer date.

Where the transfer falls within the unauthorised payment policies, tax penalties of up to 55% on the transfer value might apply. Even if you have transferred funds before the policies change.

Need QROPS advice? Let us help you.

Overseas pension transfers are complicated and a key target for pension fraud, so do not undervalue the significance of regulated advice. You should examine your variety of options to find the most appropriate pension solution for your specific situation.

All the same, you will need professional advice to find a suited product, understand cross-border tax issues, and essentially ensure your long-lasting financial security and safety in this ever-changing pension landscape.

Lawsons Equity’s qualified independent advisers will answer any questions and provide impartial guidance which will help you with the below:

Understanding the benefits and drawbacks of a QROPS.
Determine if a QROPS is suitable for you.
Discover all the options available to you as an expat or UK resident.
Get clarity on fees or costs associated with a QROPS.
Get a second opinion about their advice if another adviser contacted you.

To schedule a no obligation initial consultation, click here. We look forward to hearing from you.

Lawsons Equity Malta

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

The value of investments and income from them may go down. You may not get back the original amount invested

Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries click here

Weekly Market Update – 3/05/21

European shares ended barely changed this week after a rise in Eurozone bond yields prompted investors to take profits at near record levels. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 0.38% lower. The major indexes posted mixed results: Germany’s Xetra DAX Index eased 0.94% and Italy’s FTSE MIB slipped 1.00%, while France’s CAC 40 advanced 0.18% and the UK’s FTSE 100 Index gained 0.45%.

Core eurozone bond yields trended higher amid concerns the U.S. Federal Reserve might consider tapering its bond buying program. Higher-than-expected German inflation data published also raised core yields. Yields in the UK and peripheral bond markets in the Eurozone also climbed higher, largely tracking movements in US Treasuries and core Eurozone bonds.

The major US indexes ended mostly lower, but the S&P 500, the Nasdaq Composite, and the S&P MidCap indexes all reached new highs before giving up their gains on Friday. Returns within and among sectors varied widely, as investors acted in response to a flood of first-quarter earnings reports, although an increase in oil prices to six-week highs provided a general boost to energy stocks.

Communication services shares outperformed within the S&P 500, aided by earnings and revenue beats from Facebook and Alphabet (Google). Technology stocks underperformed, weighed upon by a decline in Microsoft despite the company reporting earnings that surpassed consensus estimates. Health care shares were also weak, pulled lower by declines in several major drugmakers.

The solid economic data pushed the yield on the benchmark 10-year Treasury note higher for the week, but the generally pacifistic tone of Powell’s press conference on Wednesday seemed to help moderate the increase. (Bond prices and yields move in opposite directions.) Municipal bonds outperformed Treasuries for much of the week, helped by inadequate new supply. Demand was focused in shorter-term munis, however.

Japan’s stock markets ended up the week lower, with the Nikkei 225 Index down 0.72% and the broader TOPIX Index dropping 0.87%. Declines were notable on Friday, as some firms’ worse-than-expected earnings releases exerted downward pressure on markets. Investors also adjusted positions ahead of the continuation of the Golden Week holiday, which sees markets close May 3– 5. The yen weakened against the U.S. dollar, closing at JPY 108.9, while the yield on the 10-year Japanese government bond rose to 0.09%.

Chinese shares noted a weekly loss as the government’s continued crackdown on technology firms dampened buying sentiment. The large-cap CSI 300 Index declined 0.2%, while the Shanghai Composite Index shed 0.8%. In bond markets, the yield on China’s sovereign 10-year bond edged up 2 basis points to 3.20%.

April was a good month for commodities, even though the final day of the period– Friday, April 30– wasn’t so good with small falls across the board. Gold dipped sightly on Friday to settle at $1768.70, still range bound and unable to sustain a move back above $1,700 an ounce. After closing in on a record on Thursday, three-month copper’s turned lower on Friday on the London Metal Exchange to close at $9,825 a tonne, down $60 from Thursday. The red metal did reach $10,008 per tonne on Thursday, closing in on the all-time high of $10,190 per tonne from February 2011.

In oil markets, Brent crude futures settled down $1.30, or 1.9%, at $67.26 a barrel on Friday, while US West Texas Intermediate (WTI) crude futures settled down $1.47, or 2.26%, at $3.54 per barrel. Brent gained 1.7% over the week, and WTI rose 2.3%. While WTI and Brent saw their biggest daily drops in more than three weeks, they also saw monthly gains of near 6% and 8%, respectively.

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.

The value of investments and income from them may go down. You may not get back the original amount invested

Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries click here

Month: May 2021

21st – 28th May 2021

Lawsons Equity – Financial Advisors Malta

Why is it important to talk about money?

1) To teach financial literacy to younger generations

2) To improve our mental health

3) To make better financial decisions

How to talk about money

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Lawsons Equity – Financial Advisors Malta

British financial services and Brexit.

Does this impact all British financial firms?

How could this impact you?

Financial planning after Brexit

Do you own UK property?

What about pensions in the UK?

Lawsons Equity – Financial Advisors Malta

Lawsons Equity – Financial Advisors Malta

Bank deposit guarantee schemes in the UK and the EU

EU banks

Savings – National deposit guarantee schemes.

Timetable for savings protection payments in the EU

UK Banks

Timing of savings protection payments in the UK

UK offshore centres

Jersey and Guernsey

Isle of Man

Luxembourg’s ‘Triangle of Security’

Protection of your investments and savings

Lawsons Equity Financial Advisors Malta

What is the lifetime allowance?

Who is impacted by the lifetime allowance?

What are the lifetime allowance charges?

How do you check your LTA position?

How can you safeguard your pensions from the lifetime allowance?

Evaluating your pension options.

What if you are currently over the limit?

Lawsons Equity – Financial Advisors Malta

Should I transfer my UK pensions?

Qualifying recognised overseas pension schemes (QROPS) explained.

QROPS Qualifying Criteria: Is a QROPS suitable for you?

You may be eligible for a QROPS if you meet the following criteria:

Qualifying recognised overseas pension schemes (QROPS) and tax efficiency.

Examining the lifetime allowance and overseas tax charge.

How QROPS in Malta are taxed.

How QROPS in Spain are taxed.

How QROPS in France are taxed.

How QROPS in Portugal are taxed.

Qualifying recognised overseas pension schemes and flexible access.

Qualifying recognised overseas pension schemes, diversification and investment choices.

Qualifying recognised overseas pension schemes and estate planning flexibility.

Qualifying recognised overseas pension schemes and multi-currencies choices.

Qualifying recognised overseas pension schemes and freedoms from UK legislation.

Need QROPS advice? Let us help you.

Lawsons Equity Malta

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