If you’re trying to get over the winter blues, planning your next holiday can be the perfect way to escape. Whether you’re looking for relaxation or adventure, there’s plenty to choose from. This year’s list of top ten counties to visit from Lonely Planet could be just the inspiration you need.

So, without further ado, here are the top destinations for 2020.

1. Bhutan

Until recently, Bhutan was rarely visited or talked about among tourists. But that’s slowly changing. Even now, the Himalayan country carefully restricts the number of tourists. It results in an exceptional experience for those that make the journey. You can expect to walk mountain trails, visit monasteries and take in the culture without the crowds you’d expect in other destinations. With strict rules around preserving nature and the way of life, the beauty of Bhutan is set to remain. It’s a unique destination that really does give you an opportunity to escape.

2. England

You don’t even have to set foot on a plane to see amazing sights. Taking spot two this year is England. It’s easy to overlook what our own country offers tourists but from stunning landscapes to historical buildings, England’s got a lot to offer and a staycation could be perfect for 2020. One of the key reasons England makes it on to Lonely Planet’s list is the coastline. The England Coast Path continues to open this year, which will create the longest continuous trail of its kind in the world at 3,000 miles. Why not make plans to explore part of it in 2020?

3. North Macedonia

The tiny nation of North Macedonia in the Balkans is ideal if you’re looking for natural beauty. The stunning Lake Ohrid and the historic town on its shores has already made a stamp on the map for tourists. But there’s plenty more if you stray off the usual track. The national parks offering quiet walking trails and beautiful views. The country has a rich and fascinating Greek, Roman and Ottoman heritage to explore if you’re a keen history and culture buff too.

4. Aruba

Keen to head to an island paradise this year? Aruba might be just what you’re looking for. Located in the southern Caribbean Sea, it has, as you’d expect, pristine beaches and palm trees. For relaxation, it’s perfect. For when you’re ready to get off the sun lounger, there are plenty of activities to try, such as diving and snorkelling, whilst the towns can provide a festival atmosphere to enjoy day or night, particularly in the unique city of San Nicolas, which is just a short trip away from the compact capital of Oranjestad.

5. eSwatini

Formally known as Swaziland, eSwatini is packed with culture and adventure. However, one of the biggest draws to visiting this country in 2020 is the impressive wildlife. Visit one of the wildlife reserves and you have a chance to encounter all the big five – elephants, rhinoceros, leopards, buffaloes and lions. If a safari is on your bucket list, eSwatini is an excellent place to plan a holiday. For those looking for an adrenaline rush, there’s plenty on offer, such as rafting and ziplining, whilst the lively local culture will completely immerse you during your stay here.

6. Costa Rica

Another top destination for wildlife is Costa Rica. For a small country, Costa Rica has incredible diversity that can be explored across its rainforest waterways and palm-lined beaches. If you’re looking for a laid-back trip, the beaches, spas and towns are ideal. If you’re hoping to get active, the lively town of San Jose can provide a great base, plus you can walk up volcanoes and take part in adrenaline-filled activities too. Whatever your holiday style, be sure to plan some time exploring this slice of tropical paradise.

7. The Netherlands

Not too far from home, the Netherlands is a great destination if you’re looking for a short break but there’s enough to do across the country if you’re hoping to get away for longer. Amsterdam, of course, has long been a vibrant city on the list of many travel lovers. Mixing the traditional and the new, the Netherlands is an excellent destination to explore, especially by bike. Boasting more than 35,000 km of cycling paths, you can get out of the city and find lesser-known attractions without having to worry about public transport or hiring a car too.

8. Liberia

Situated in West Africa, Liberia is still a little-known tourist destination but there are two big reasons to visit here. First, there are beaches that are perfect for relaxing and surfing. Then there are the lush, dense forests that are home to an abundance of wildlife. The Sapo National Park is known as one of the best in South Africa and is home to chimpanzees, forest elephants and the famous pygmy hippos. If you’re a fan of shopping, the bustling markets are the place to head for souvenirs to take home with you.

9. Morocco

Morocco is known as the gateway to Africa and it’s steeped in history to explore. It’s an excellent choice if you’re a fan of delving into a new culture and the history of a destination. Ancient Medinas, think historic city centres, are places where you can spend hours exploring, sampling the food and sipping coffee in a street café as you watch the world go by. Marrakesh, which is Africa’s first Capital of Culture in 2020, is a vibrant place to consider but so too are other cities, including Fez, Tetouan and Essaouira.

10. Uruguay

Finally, we head to South America with Uruguay. Located between Brazil and Argentina, it’s the continents smallest country. You can choose between cosmopolitan areas with plenty of attractions for tourists, picturesque coasts and vibrant areas to party in the evenings. But don’t forget to take a step off the beaten track to go wildlife watching and view the natural beauty of Uruguay too.

Are you planning to give children and grandchildren a helping hand to get on the property ladder this year? If so, you’re not alone. As younger generations are struggling to purchase their first home, thousands of parents and grandparents are putting their hand into their pocket. But what does it mean for your long-term financial security?

Research from Legal and General suggests that family members offered gifts and loans to the tune of £6.3 billion in 2019. This generosity was estimated to support property purchases totalling £70 billion. Compared to last year, the total amount lent has increased by 10% despite the number of transactions falling.

Whilst gifting or lending loved ones the money to act as a deposit on their first home can be rewarding in itself, you do need to look at the long-term picture. The sums being handed over can be significant. In fact, the average amount passed down now stands at £24,100. In order to do so:

• 15% of over-55s have accepted a lower standard of living after helping family buy a home
• 21% dipped into ISA savings, 7% used their pension drawdown and 6% used income delivered from Annuities
• 16% unlocked housing wealth through a lifetime mortgage to provide financial support

In many cases, these steps won’t present an issue. But, worryingly, over a quarter (26%) of Bank of Mum and Dad lenders are not confident they now have enough money to last throughout retirement. 10% also said they no longer feel financially secure.

So, how can you financially help your family and still be confident in your own future?

Using cashflow modelling to understand the impact of a financial gift

Let’s say you’d like to give £20,000 to a grandchild to help them purchase their first home. It’s a sum you might have stashed away in a savings account or investment portfolio. It’s not something you need to use now to maintain your lifestyle.

But will giving that money away now mean you struggle financially in ten or 20 years’ time? Could it mean that the care you’d prefer if it were required is out of reach?

It’s not unusual to worry about the long-term impact of a lump-sum gift. Yet, it can be difficult to understand what that impact may be. This is where financial planning and using cashflow modelling as a tool can give you peace of mind. Cashflow modelling is a visual way to show how your wealth may change over time, demonstrating the consequences of different decisions. You can see how withdrawing a lump sum now could affect your income and assets over the short, medium and long term.

Often clients find they’re in a position to help their loved ones with a financial gift, and the financial planning process means they can do so with confidence in their future as well as their families.

Providing support if a financial gift isn’t an option

Should you find a financial gift isn’t an option for you, there may still be a way you can offer support. There are other ways in which you can help children or grandchildren make that first step on to the property ladder.

• Provide a loan: Four in ten of those providing financial support to family members, require some form of repayment. If, after assessing your finances, you find you need the money at a later date, a loan can work well. Low-interest rates on mortgages mean family members that have been renting will often find outgoings reduce when they buy their own home, allowing them to pay you back. If this is the route you want to go down, be sure to take legal advice.
• Look into offset mortgages: An offset mortgage is linked to a savings account. When money is placed in the savings account, it can reduce the amount of deposit needed and reduce interest rates. It allows you to provide support whilst still retaining control over your savings. You usually won’t continue to receive interest on your savings, however, will not be paying interest on the equivalent mortgage amount. Your money may also be tied up for a defined period of time. You should research the different options to see how they fit in with your pla,s
• Use a family mortgage: A family mortgage allows children or grandchildren to borrow more or reduce the deposit needed by using your home or savings as security. You’ll usually have to own your home outright, or owe relatively little on a mortgage, for this to be an option. If you use your savings, you will continue to receive interest on them so won’t lose out there. Again, there are some important considerations here. If your child or grandchild defaults on their mortgage, you’ll be responsible too and could lose your own home as a result. Make sure those you’re helping can afford the mortgage and understand the implications it could have on you.
• Reduce inheritance: If you have money earmarked for an inheritance, it may be worth looking at whether it would have a greater impact now or in the future. In some cases, your generosity could lead to loved ones having a financially secure future if it’s given now.

If you’d like to explore your options to help younger family members get on the property ladder, please get in touch. We’ll help you understand how a gift could impact your financial wellbeing, as well as what your other options are.

Thousands of investors have been sucked into putting their money into unsuitable mini-bond products following extensive advertising, particularly on social media. The Financial Conduct Authority (FCA) has now clamped down on the marketing of such products following a scandal. But many are likely to lose their money.

What is a mini-bond?

A mini-bond is effectively an IOU where you lend money directly to businesses, receiving regular interest payments over the term of the bond. However, the money you make back is based entirely on the firms issuing them and not going bust. As a result, they aren’t suitable for most investors. If the business collapses, you’re not guaranteed to receive your money back. Mini-bonds are not normally protected under the Financial Service Compensation Scheme (FSCS) either.

The London Capital & Finance scandal highlighted this.

Around 11,500 bondholders poured £237 million into London Capital & Finance after being promised returns of 6.5% to 8%. The investment opportunity was advertised extensively, including on social media platforms. This meant it reached a wide range of investors, including those it may not be suitable for. The firm collapsed in January 2019 and investors could lose all their money tied up in the mini-bonds. For some investors, it could mean losing their life savings or having to adjust plans significantly.

Coming into force on 1 January 2020 and lasting for 12 months, the FCA has banned mass marketing of speculative mini-bonds to retail customers. Over the course of the year, the regulator will consult on making the ban permanent.

Andrew Bailey, Chief Executive of the FCA, said: “We remain concerned at the scope for promotion of mini-bonds to retail investors who do not have the experience to assess and manage the risk involved. The risk is heightened by the arrival of the ISA season at the end of the tax year, since it’s quite common for mini-bonds to have ISA status, or to claim such even though they do not have the status.”

As a result, speculative mini-bonds can only be promoted to investors that firms know are sophisticated or high net worth.

Learning from the mini-bond scandal

The FCA ban aims to protect investors, but some lessons can be learnt from the mini-bond scandal too.

1. Make sure you understand your investments

Investments can be confusing, but you should ensure you understand where your money is going before parting with your cash. Taking some time to do your research can give you more confidence in your decision and reduce the risk of choosing products that aren’t right for you. If you’d like to discuss an investment opportunity and how it fits into your plans, you can contact us.

2. Ensure investments are authorised and regulated

Investments that are regulated and authorised by the FCA can provide you with protection. The regulation around mini-bonds is much less stringent than for listed bonds. What’s more, a business does not have to be regulated by the FCA to issue mini-bonds. As a result, they aren’t suitable for most retail investors. Even when a business claims to have regulations, it’s worth checking this is true and understanding what protection this offers you, if any.

3. Make sure investments fit your risk profile

Mini-bonds are considered a high-risk investment. That means there’s a greater chance your returns could be less than your initial investment or that you lose all your money. Your risk profile should consider a range of different areas, such as your capacity for loss, investment goals and other assets. In many cases, the risk associated with mini-bonds would be too high for typical investors.

4. Be mindful of scams

Financial scams are rife, and the mini-bond scandal highlighted why it’s important to carry out due diligence. Some mini-bonds falsely claimed to have ISA status, making them more tax efficient. This could mean some investors face unexpected tax charges. However, this claim could also lead investors into making a decision that’s wrong for them. ISAs are commonly used products and considered ‘safe’, in contrast to mini-bonds.

5. Don’t rush into making decisions

When you see an ad with an enticing offer, it’s easy to react straight away. However, carefully considered decisions are far more appropriate than impulse ones when it comes to investing. Don’t rush into making investment decisions. Instead, take some time to think about what your options are, and which is most appropriate for you.

6. Be realistic about investment performance

With some money bonds claiming to be low risk whilst offering returns of 8%, it’s easy to see why retail investors were tempted. But investments with higher potential returns will carry higher levels of risk too. When assessing investment opportunities, be realistic. Here, the old saying rings true: if it sounds too good to be true, it probably is.

Please contact us if you have any questions or concerns about your investment portfolio. Our goal is to ensure each of our clients is comfortable with their investments, and wider financial plan, including the level of risk involved.

Please note: The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Venture Capital Trusts (VCTs) have been around for 25 years! Over those years, they’ve become an important part of investment portfolios for many people. But are they the right option for you and how could they fit into your wider plans?

Back in November 1994, then Chancellor Kenneth Clarke unveiled VCTs as part of his budget and established them the following year. The reason for doing so was to generate investment opportunities in “dynamic, innovative growing businesses”. They were designed to give individual investors a way to access venture capital investments, expanding options.

Of course, they’re not an appropriate investment choice for every investor. It’s important to understand how VCTs operate, the level of risk presented and whether it suits your overall goals before proceeding.

Getting to grips with VCTs

A VCT is an investment company that’s set up to invest in small UK businesses. These companies are often early-phase that are either unquoted or listed on the AIM, a sub-market of the London Stock Exchange. They need investment in order to develop quickly. They have the potential to deliver high returns but there’s a risk that comes with this.

You’re backing smaller companies that are typically unproven. As a result, there is a risk that the value of investments will go down.

As an incentive to investing through VCTs, the government offers tax relief. When you invest in new VCT shares, you’re entitled to claim tax incentives up to £200,000. These include:

• Up to 30% Income Tax relief on the amount invested
• Tax-free capital gains
• Tax-free dividends

Other benefits to using a VCT is that it can help you diversify your portfolio by accessing different companies to back.

But these incentives and benefits shouldn’t be the only thing you look at when deciding to invest in a VCT. Keep in mind that a VCT is a long-term investment. Values may fall and it’s likely that more volatility will be experienced than if you invested on the London Stock Exchange, for example. Carefully assess your investment risk profile before looking at VCTs.

It’s also important to note that tax treatment will depend on your individual circumstances and VCTs must maintain its qualifying status to deliver investors tax relief.

The success of VCTs

Although not suitable for every investor, VCTs have proven popular and helped some well-known companies find their feet.

According to Money Observer, individual investors have ploughed more than £8.48 billion into VCTs over the last 25 years. In the first tax year after legislation was introduced, 12 VCTs raised £160 million. By 2018/19 this had increased to 34 VCTs that raised £731 million.

Over the years, many businesses have benefited from VCT backing, including Zoopla, Secret Escapes, Five Guys and Everyman Cinemas. Some lucky investors have reaped the rewards of backing these successful companies early on. In 2018/19, VCTs paid out £294 million in tax-free dividends.

Three of those very first VCTS are still operating today. According to Money Observer calculations, if you had made a £10,000 investment at launch, and reinvested all dividends, your total returns would be:

• Northern Venture Trust: £47,837
• Albion VCT: £39,848
• British Smaller Companies VCT: £31,461

Once you factor in tax relief, the returns rise even further. Assuming income tax relief was claimed on the initial investment and subsequent dividend reinvestments the figures would be: 

• Northern Venture Trust: £63,797
• Albion VCT: £52,177
• British Smaller Companies VCT: £42,680

When are VCTs suitable?

A glance at the returns certainly makes VCTs look like an attractive option for investors. But they’re not suitable for the majority of investors.

VCTs tend to be considered for investors that already have large portfolios holding mainstream investments. They can be a way to diversify a portfolio but how the risk of VCTs will adjust the overall portfolio position needs to be considered. If you have a low tolerance for investment risk, a VCT may not be right even if you have a significant amount invested elsewhere.

The tax incentive can also make VCTs valuable for investors that have used their ISA and pension allowance in full. Furthermore, it can be a way to reduce your tax bill for high net worth individuals. If this is your goal, it’s important you look at what other solutions may be open to you too.

Finally, as with all investments, putting money into a VCT should be done so with a long-term horizon. In addition to smoothing out short-term volatility, VCTs must be held for five years to permanently keep the up-front tax relief.

Please note: The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Managing pension contributions and tax liability can be tricky. If you’re affected by the tapered allowance, it can be even more challenging. The Secretary of State for Health and Social care has announced there will be a review into the impact of the tapered allowance and its impact on NHS staff. But it’s not just NHS staff that should ensure they understand how it works.

What is the tapered annual allowance?

When you’re saving into a pension there are two allowances you need to keep in mind: the annual allowance and the lifetime allowance. These two allowances limit how much you can save tax-efficiently in a pension. As the name suggests, the annual allowance dictates how much tax relief you can receive in a tax year, whilst the lifetime allowance refers to the total amount over your working life.

For the 2019/20 tax year, the annual allowance is a maximum of £40,000. However, it’s not as simple as having an allowance that applies to every worker. In some cases, your allowance may be significantly lower. One of the reasons for this is the tapered annual allowance.

If your threshold income if over £110,000 or your adjusted income is over £150,000, you could be affected by the tapered annual allowance.

First, what are the definitions of threshold and adjusted income?

Next, how much is your annual allowance reduced by? For every £2 your income exceeds the threshold, your annual allowance will reduce by £1. The maximum reduction is £30,000. This means some workers can be left with an annual allowance of just £10,000.

Exceed your annual allowance and your pension contributions will not be legible for tax relief. This could mean an unexpected tax bill if you aren’t aware of your pension position. It’s worth noting that unused annual allowance from the previous three tax years can be carried forward.

NHS: Bringing the tapered annual allowance to the forefront

The tapered annual allowance has been featuring in the news due to the issues it’s causing in the NHS. High earners within the NHS have found they can face an unexpected tax bill if they work overtime or receive a pay increase. This has led to some senior members of staff turning down additional work over fear they will need to pay out more.

As a result, Matt Hancock, Secretary of State for Health and Social Care, has stated there will be an ‘urgent review’ into the tapered annual allowance for pension relief. Solutions put forward so far include allowing NHS staff to flexibly change their accrual rate and adjust it where necessary to reflect earnings.

Whilst the review is good news for NHS staff, there haven’t been any suggestions that it could be extended to other industries. However, some are calling for the tapered annual allowance to be scrapped altogether.

Steve Webb, Director of Policy at Royal London, said: “The tapering of the annual allowance has caused major problems in the NHS. All year we have been hearing of doctors who are restricting their hours to avoid the risk of large lump sum tax bills.

“The tapered annual allowance is complex and makes it very hard for taxpayers to know where they stand. The solution is to abolish the taper outright, even if this means a lower across-the-board annual allowance for all.”

Managing your annual allowance

If you’re affected by the tapered annual allowance, it’s important you manage your pension contributions. This can help make the most of your savings and reduce your tax liability.  There are several key things to do if you’re worried about the annual allowance.

1. The first step is to make sure you understand exactly what your annual allowance is. This can be difficult if you’re affected by the tapered annual allowance. But it means you can control your pension contributions, so you don’t face an unexpected bill and maximise your retirement savings.
2. If you’ve recently been affected by the tapered annual allowance, carried forward allowance could help you save more tax efficiently. If you don’t use unused allowance from previous tax years, they will disappear after three years.
3. Actively keeping an eye on your pension contributions is important if you may exceed your annual allowance. You can adjust or even pause your contributions to ensure you don’t pay avoidable tax.
4. A financial planner can help you make the most out of your savings. If you’d like to maximise pension savings whilst mitigating avoidable tax on contributions, please get in touch. We’ll work with you to create a bespoke financial plan that considers your personal circumstances, including the tapered allowance where necessary.

Please note: A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.

Welcome to our latest update on the investment market. We take a quick look at some of the key factors that influenced the stock market in November and could continue to do so over the coming months.

The hot topics that have affected the markets in 2019, Brexit, the US-China trade war and concerns of economic slumps, look set to continue as we head into 2020. In fact, the OECD has stated that the global outlook is unstable. The world’s economy is expected to grow by 2.9% this year and next, the lowest rate since the financial crisis a decade ago.

UK

With the General Election approaching in December and the outcome of Brexit still uncertain, there continue to be headwinds in the UK. However, the country narrowly avoided recession with growth of 0.3% in the last quarter. But the uncertainty around the UK’s relationship with the EU continues to affect growth.

Several data releases have also indicated that the economy is still struggling:

• Whilst the manufacturing decline has slowed, the sector is still declining. The PMI registered 49.6 in October, compared to 48.3 in September. It’s the highest reading since April but any figure below 50 indicates the sector is shrinking
• The service sector PMI has improved, now registering 50, indicating that it’s stagnated amid uncertainty but has performed better than expected
• Car sales fell 6.7%, suggesting that consumers are nervous about making major purchases
• The job market is under strain, with the biggest fall in vacancies since 2009. Whilst employment figures show a modest change, from 76.1% to 76% in the last quarter, it represents 58,000 fewer people in work
• UK public borrowing has reached a five-year high in October. The figure surged to £11.2 billion, compared to £8.9 billion in October 2018

Taking a closer look at certain sectors and companies there has been both gloom and bright spots for investors.

If you’re invested in gambling firms, you likely saw a slide in the value of shares in November. The movement came as MPs demanded a crackdown in a report from the all-party parliamentary group. Among the recommendations, the report made were to end betting on credit cards and a £2 stake limit on online slot machines.

Some communication firms’ shares were also affected by the general election. After Labour announced plans to deliver free broadband, it’s not surprising providers saw a slump. The election pledge has drawn criticism from the industry with the CBI stating it ‘is not the way’ to improve the level of service delivered.

Woes on the high street have continued, with Mothercare entering administration. After the business concluded that it could not bring stores back to ‘sustained profitability’ thousands of retail jobs were put at risk.

There has been good news though. First, after six months of uncertainty after the firm fell into liquidation in May, British Steel is set to be taken over by China’s Jingye Group. The group has plans to invest £1.2 billion in British Steel over the next decade. It’s a move that could protect thousands of jobs.

Investors in Nottingham-based Games Workshop are likely to be pleased with the firm’s success. Shares hit a record high as profits continue to rise, they’re expected to be a third higher than just a year ago.

Europe

There are growing concerns that Germany is now in a recession, with the country often being seen as a stalwart of the region this raises worries for the rest of Europe. Germany’s manufacturing sector saw orders fall for the 13^th consecutive month, with the PMI down to 42.1.

The International Monetary Fund has issued fresh warnings that Europe’s economy has weakened this year, linked to a slowdown in factory output and weaker trade.

The European Central Bank has also stated the risk of global financial instability has increased. It blamed this on ‘shadow banks’, such as investors, insurance companies and pensions funds, lending more to businesses in place of traditional lenders.

US

Throughout November, there was increased optimism that a partial trade deal would be reached with China, as tensions continue to impact both countries and the rest of the global economy. Yet, despite stocks rising on the suggestion a deal was close, nothing has been announced.

However, US growth has been revised upwards. GDP grew at an annualised rate of 2.1% between July and September. It was increased from 1.9% that was estimated a month ago, delivering a boost to share prices.

Asia

Ongoing protests in Hong Kong continued to make the news as they entered their sixth month. A landslide victory for pro-democracy campaigners in November’s election indicates the tensions aren’t going to disappear any time soon. But there was some positive investment news coming out of Hong Kong this month. E-commerce site Alibaba raised £8.8 billion of shares through a secondary listing of share offers after it previously floated in New York back in 2010. It was among the city’s biggest offerings of the last ten years.

Trade tensions with the US have continued to cause problems for China. But the PMI showed a surprise rise with factory activity ramping up to the fastest pace in more than two years.

With a slowing economy and trade tensions affecting Japan, a new stimulus programme is set to launch. It’s hoped that investment plans will boost the economy. Further details have yet to be announced but it’s an area to keep an eye on.

Read our blog for more investment updates.

If you have any concerns about your investment portfolio in light of recent events, please get in touch.