Wealthsmiths Summer 2020

Wealthsmiths

™

The Sanlam magazine – Summer 2020

Unicorns are alive and well The UK has created 77 $1 billion tech firms

What happens if you live to 200?

The first person to do so may already have been born

Can investors trust the media?

Why financial pundits aren’t always right

Vital links Craft skills contribute £3.4 billion to the UK economy, but are they under threat from a lack of art lessons in schools?

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elcome to another issue of Wealthsmiths magazine, which we are publishing in extraordinary times.

The coronavirus outbreak has affected every one of us and we all owe a debt of gratitude to the key workers who have put themselves in harm’s way to keep us safe and our society functioning. From our NHS staff and emergency services to the transport workers, delivery drivers and those keeping our supermarkets open, they have done an amazing job. It’s hard to put into words what we all feel at this time but on pages 24 – 25 our Big Picture attempts to capture those feelings in one simple and powerful image.

As a client of Sanlam you may have been following news reports about the financial markets with some trepidation but now is the time to take expert advice, stick to your investment strategy and maintain your discipline. While the media seeks to entertain us with its stories of market highs and lows, our feature on page 26 explains that most portfolios are designed to weather periods of uncertainty.

And while coronavirus may be occupying our thoughts at the moment, we’ve also covered some happier topics. The new academic year will start in the autumn and we learn in our article on page 7 that our top universities are making progress in welcoming more students from disadvantaged backgrounds.

We hope they will expand their intake so that talented young people from both state and private schools have the opportunity to succeed.

You should also ask yourself whether you’ve forgotten about an old pension pot. Our investigation on page 29 reveals that there is £37 billion sitting in pensions that people have simply forgotten. With the average value of these savings standing at £23,000 it’s certainly something that’s worth considering.

And if you’ve ever seen yourself behind the wheel of a classic car, take a look at our feature on page 21. We’ve focused on vehicles to suit all pockets, from the 1962 Ferrari 250 GTO that fetched £37 million and James Bond’s £5.2 million Aston Martin DB5 to the humble Jaguar XJS, that can be found for as little as £5,000.

I hope you enjoy this issue and do keep yourself safe and well.

Contributors Jess Unwin Jess is an accomplished journalist who has written for a range of business and finance titles during his 30-year career.

Hannah Stodell Hannah has written for publications including The Oxford Said Review, BVCA Journal, Money Marketing and The Grocer.

Paul Bryant Paul has worked for McKinsey & Company and writes extensively about financial markets and investing for organisations such as the Chartered Institute for Securities and Investment.

Ruth Jackson-Kirby Ruth has been writing about personal finance for a decade, specialising in pensions, mortgages, investment and tax.

Wealthsmiths is produced for Sanlam by Wardour, Drury House, 34–43 Russell Street, London WC2B 5HA, United Kingdom +44 (0)20 7010 0999, wardour.co.uk For Sanlam Head of Marketing Christopher Dean Marketing Executive Kate Lovelace Marketing Manager – Private Clients Jolyon Dean Marketing Operations Manager Bhavika Gor For Wardour Editor Andrew Strange Art Director Rob Patterson Production Manager Jack Morgan Senior Account Director David Poulton Senior Account Manager Jennifer Flower Creative Director Ben Barrett CEO Claire Oldfield Executive Chairman Martin MacConnol

John White CEO, Wealth Management CBP003555

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Wealthsmiths Summer 2020

Contents

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04 News and analysis The business and economic news you need to know

07 A school of thought New steps are being taken to make top universities accessible to all

09 Masters of their craft Craft skills contribute £3.4 billion to

the economy but could be under threat

13 World on fire The rise of environmental, social and governance investing

16 7 things you didn’t know about unicorns The UK has created 77 tech firms valued at $1 billion or more

18 Living a 200-year life Scientists believe the first person

to do so has already been born, but what does it mean for our lifestyles?

21 Getting behind the wheel From a £37 million Ferrari to a

£5,000 Jaguar XJS, there’s plenty of choice for classic car enthusiasts

24 Big picture A picture tells a thousand words, so our Covid-19 image seeks to articulate what we are all feeling

26 Can investors trust the media?

Research suggests that the predictions of pundits are often indistinguishable from chance

29 Finding your lost pension There is in the region of £37 billion sitting in UK pensions that people have simply forgotten about. So, could any of it be yours?

32 Entrepreneurs’ relief Chancellor Rishi Sunak’s decision

to reform entrepreneurs’ relief will leave some business owners with bigger tax bills

34 A town fit for Mr and Mrs Bond In the latest in our series on towns that are home to Sanlam offices we learn all about Tunbridge Wells

Important note Sanlam is a trading name of Sanlam Private Investments (UK) Limited, registered in England and Wales 2041819, Registered Office: Monument Place, 24 Monument Street, London EC3R 8AJ; Sanlam Private Wealth South Limited, registered in England and Wales, 11541514, Registered Office: St Bartholomew’s House, Lewins Mead, Bristol BS1 2NH; Sanlam Wealth Planning UK Limited, registered in England and Wales 3879955, and English Mutual Limited, registered in England and Wales 6685913, Registered Offices: St Bartholomew’s House, Lewins Mead, Bristol BS1 2NH. English Mutual Limited is an appointed representative of Sanlam Wealth Planning UK Limited. Sanlam Wealth Planning UK Limited, Sanlam Private Investments (UK) Limited and Sanlam Private Wealth South Limited are authorised and regulated by the Financial Conduct Authority. Past performance is not a guide to the future, investments may fall in value and you may not get all your capital back. Tax rules are subject to change and based on our understanding as at April 2020. The information provided should not be taken as financial advice, and you should always seek professional advice.

If you no longer wish to receive your half-yearly edition of Wealthsmiths, please email us at getintouch@sanlam.co.uk to opt out.

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News and analysis Our news and analysis focus on the repercussions of the coronavirus crisis, including the longer-term outlook, the winners and losers, and how to remain positive throughout it all.

The importance of resilience It’s safe to say that 2020 will go down as a decisive year for both society and the global economy. It could be several years before we are able to count the true human and financial cost of the coronavirus, and it would be wrong to underestimate the impact it will have on our wealth and livelihoods.

But it’s also important to remember that short-term financial crises tend to look less dramatic when viewing them through the lens of longer-term trends. Take

global equity markets, for example. As the graph shows, the shock of Black Monday in October 1987 is a mere blip on the global equity landscape.

And while it took longer to recover from the bursting of the dot-com bubble in 2000 and the credit crunch of 2008, investors enjoyed many years of continued growth in the aftermath of these events.

As difficult as the first half of this year has been, it will also have yielded investment opportunities. We may not reap the rewards of those

opportunities immediately, but we will. As for the longterm effect on society? If past human crises are anything to go by, hopefully we will reflect on this global pandemic in years to come as a period of incredible innovation and positive changes to the way we live and work.

Above all else though, we will remember the many people who sadly lost their lives, and all our front-line key workers who kept us safe and looked after the vulnerable.

We are all truly humbled.

Historic highs and lows of the MSCI World Index Source: MSCI World Index

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Insights

The companies thriving through the pandemic As the coronavirus spread, thousands of businesses were forced to close. But not every business has suffered. Amid any crisis, there will be winners and losers, and there are a number that have seen their products and services in high demand thanks to social distancing and the change in human behaviour.

Here are some examples of companies that have increased their market share as a direct result of the coronavirus crisis.

NetEase is the number two online gaming company in China and has a very long history of producing top quality games. As millions of people were quarantined, gaming became the go-to pastime for increasing numbers of people. And the crisis helped to encourage the use of NetEase’s online education capability, which would have taken a lot longer under normal circumstances.

As billions of people rely on Facebook to connect with family and friends throughout the crisis, the platform has maintained its advertising revenue while other mediums suffer.

Because Facebook enables advertisers to track the success of their adverts, this may well accelerate the shift from traditional to digital advertising, which will be very good news for them.

Yum China runs the KFC and Pizza Hut franchises in China. These brands are considered upmarket versus their Chinese competitors. They are therefore seen as a paragon of food safety, which could be important in a postcorona world. Big chains can also withstand financial shocks better than small operators, so as small restaurants go out of business, larger players will take market share.

Booking Holdings may not be an obvious choice for a winner in the recent crisis given the catastrophic effect it has had on the travel industry. But looking ahead we think they will be a big beneficiary thanks to their rocksolid balance sheet. Hotels will need to lean on them in a desperate attempt to fill rooms, which means they will take their share in a downturn.

Please remember that the information and opinion contained in this article should not be treated as a forecast, research or advice to buy or sell any particular investment or to adopt any investment strategy.

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Coronavirus in numbers

25%

The estimated CO2 reduction in China at the height of the crisis.

Source: https://tinyurl.com/yx2w9l5o

£1.9 billion

The extra amount we spent on food shopping in March as the crisis unfolded – up 20% on last year.

Source: https://tinyurl.com/rlkwhsd

11%

30,000

On 12 March, the FTSE 100 suffered its second biggest one-day fall in the history of the index.

The number of ventilators produced by some of the biggest names in UK engineering.

Source: https://tinyurl.com/yx4mvbru

Source: https://tinyurl.com/vkvgxk8

Retirees advised to curb their income If you are in or nearing retirement, you may not be feeling quite so confident about the recovery of your losses. If you haven’t already, it’s essential you review your financial circumstances with an adviser. In the meantime, you could reduce the amount of income you are taking from invested assets and consider using other sources of money for now, such as cash savings. This will prevent you locking in the losses and gives your pension savings and investments the potential to recover with the markets.

Photos: Alamy

The secret of positive ageing

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When the government announced in March that people over the age of 70 should isolate themselves to avoid catching Covid-19, large swathes of older people were affronted. They felt fit and active, and the last thing they wanted to do was cut themselves off from the rest of the world.

This won’t come as a surprise to Guy Robertson, author of a new book called The Ten Steps of Positive Ageing. Robertson discusses

Wealthsmiths Wealthsmiths Summer Summer2020 2017

the idea that your real age is subjective and depends on your psychological and emotional response to getting older.

It’s well documented that being sociable and keeping your brain and body active are key to a long and happy retirement. We’ve all found these a challenge thanks to Covid-19, but hopefully losing some of the freedoms we take for granted will encourage us never to overlook the benefits of them again.

Education Education

Students at Oxford University

A school of thought After suggestions that the country’s top universities are cultivating privilege, many are taking impressive measures to encourage equality by accepting more students from disadvantaged backgrounds, writes Laura Sagar

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or a long time, top universities like Oxford and Cambridge have been famously hard to get into and for many they have been a pipe dream. “The chance to go to university has been something of a postcode lottery,” says Sir Michael Barber, Chair of the Office for Students. “What is an assumed rite of passage for many young people across the country is often viewed very differently in rural and coastal communities, the industrial heartlands and military towns.”

But as society has sharpened its focus on inclusion and diversity, those revered universities are moving with the times. In 2018, the Office for Students set new national targets to achieve equality of opportunity in higher education and, since then, universities and colleges have been devising strategies to meet them. After facing claims that they are admitting too many students from private schools and not enough from more disadvantaged backgrounds, some of the UK’s most prestigious universities have made pledges to make significant changes.

The Sutton Trust social mobility charity has highlighted the fact that students from just eight UK schools filled 1,310 (over half) of Oxbridge’s places over three years. The other 2,900 schools shared the rest of the places. The Office for Students says: “Young people from the most advantaged areas of England are currently more than six times as likely to attend one of the top universities – including Oxford, Cambridge and other members of the Russell Group – as those from the most disadvantaged areas.”

According to a new report from the higher education regulator, if these universities meet their new commitments, the access gap will almost halve in the next five years.

Target grades The aim of this new approach is to ensure that intelligent, high-performing young people from all schools across the UK have the same chance of getting into the country’s best universities. Oxford University aims to have a quarter of its students come from disadvantaged backgrounds

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by 2023. Each year, the university’s access scheme will have places for 200 high-achieving disadvantaged students.

Identifying who is disadvantaged will be done using a postcode-based system measuring the level of deprivation in the student’s local area, but the university will also consider qualifiers such as if the student has spent time in care or if they are eligible for free school meals.

“The country needs all its young people to reach their potential if we are to create a bright new future”

A degree of concern Change is not always welcome, however, and there are some who have raised concerns about the new approach. Mike Buchanan, formerly The Headmasters’ and Headmistresses’ Conference Executive Director, says: “Care is needed in starting actively to discriminate against individual young people on the basis of the class they were born into.

The country needs all its young people to reach their potential if we are to create a bright new future for Britain post-Brexit.

We urge the government to enable universities and colleges to

expand to take as many truly suitable students as necessary, rather than rob some students of a future to award it to others.”

While the aim is to create more equal opportunities for young people who are less fortunate, there is worry that by actively seeking students from disadvantaged areas, those from independent schools will miss out. This concern is amplified when parents have paid thousands for their child’s education. But the approach will not be awarding students with places based purely on their background: the criteria remain focused on academic ability while ensuring that students do not all come from the same schools.

Pass or fail Time will tell whether or not this approach to tackling the access gap will be successful. But while the outcome is unknown, the hope remains that top universities will one day be more equally accessible to young people from all backgrounds – creating a fair education system. n

How to fund a university education We asked Senior Wealth Planner Craig Miller to explain how you can help your children financially at university.

How much does it cost?

Standard tuition fees are £9,250 a year and the average living cost for a student is £807 a month, which is £9,684 a year. All in all, you’re looking at about £19,000 a year. For a three-year university course that’s nearly £57,000.

Photos: istockphoto

Has this changed over the years?

It has quadrupled since I graduated in 2002.

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How much should parents pay?

A lot of the time people don’t want to pay for everything (including the living cost, fees and rent) because they want their children to appreciate the value of money. There is a gap between the maintenance grant and the average cost of living, so there’s a minimum for parents or grandparents to contribute to make up that gap, which is about £250 a month or £3,000 a year.

That would be the bare minimum to contribute, but it depends what you can afford.

When should I start saving?

I would recommend planning from the day your child is born so you benefit from the power of compound interest. With inflation, if your child is born this year, by the time they go to university it could cost £88,000. If you make regular investments starting the day they are born, and receive 5% return a year from your investment, you would only need to pay £177 a month to cover the full cost of your child’s education.

What if I’ve left it a little late?

You can follow a similar sort of strategy but obviously you would be making much bigger regular payments. Or you could make lump sum investments and hope it grows over the time you have left to save.

Where should I keep the money?

There’s often a temptation to dip into savings, so I typically set up a discretionary trust for clients so they can’t access the money.

I would avoid junior ISAs as,

Wealthsmiths Summer 2020

although they are attractive because they are tax free, a lot of parents are not aware that as soon as their child turns 18, they can take that money and might have other plans for it.

Should I pay the fees upfront?

It can be a risk paying upfront because, if your child earns under the threshold (£25,725) or earns an average income following graduation, there is a chance that they will never have to repay all of their loan, as debts are wiped after 30 years. For this reason, it could be worth holding the funds until their post-graduation situation becomes clearer. If they are unlikely to have high earnings in their chosen career, the money could be better used for something else, such as a house deposit. As ever, it always depends on your circumstances.

Lifestyle

Lorraine Robson with her ceramic installation

Masters of their craft A recent international fair sponsored by Sanlam promoted the best contemporary art and craft, but there are concerns the UK’s craft skills could be under threat. Jess Unwin finds out more

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rafts might be enjoying a higher-than-usual profile right now, thanks to popular TV shows like The Great Pottery Throw Down and The Great British Sewing Bee, but there’s real concern that craft skills could be lost to future generations.

If those fears are realised, there would be a wider impact on society than many people would probably appreciate. The Crafts Council has calculated craft skills contribute £3.4 billion to the UK economy,1 and it points to research that shows craft can also alleviate the symptoms of anxiety, depression, loneliness and even dementia.2

The Crafts Council is the national development agency for contemporary crafts in the UK. Funded by Arts Council England, it celebrates its 50th birthday in 2021, and its goal is to make the UK the best place to make, see, collect and learn about contemporary craft.

Caroline Jackman, Talent Development Manager at the Crafts Council, says: “A lot of people’s basic understanding of craft might be that it’s just knitting groups, basket-weaving and so on, but it actually covers everything from high-end fine art to people earning a living by creating handmade products and innovative design in engineering and medical science.”

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Julia Griffiths Jones

Sarah Pulvertaft, Jed Green and Beatrice Mayfield

Photos: Charlie Surby

Steffen Dam of Joanna Bird Contemporary Collections

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Craft and the economy She continues: “If you ask any craftsperson, they see themselves as an artist, a maker or a designer but it’s hard to define everyone because crafts are so broad.

I’d say generally craft is hands-on making, and in mediums including clay, glass, metal, wood or textiles.

But it can also include digital technologies when used with physical materials. A good example of that is 3D printing.”

Craft skills and creative design make a contribution towards many industries, says Jackman. “When a company wants to stand out and be visible, they look to creative people to help them do that. That can be car and aircraft interiors, the design of the way the iPhone looks and fashion accessories too – they all need innovation in their products.”

And she says craft is becoming increasingly important as a counterbalance to so much of our lives being spent in front of a computer screen or looking at a smartphone: “We’ve seen real growth linked to craft experiences. People are willing to spend their cash on a day with friends making something. Doing something creative with your hands makes you slow down and engage with yourself and other people.”

Under threat Despite craft being “better understood” in recent years thanks to television coverage, Jackman says the crafts sector faces a major challenge with arts and design subjects not compulsory for schoolchildren after the age of 14. “That’s affecting the numbers taking art and design at GCSE and A-level, and the number of courses in higher education. So, while the UK is currently known for creative innovation and being at the forefront of design and fine arts, that’s going to be affected by the lack of skills coming through because fewer people are taking up art and crafts at an earlier age.”

Nevertheless, the Crafts Council is working closely with schools to ensure they have resources to encourage making skills in schools and it raises awareness of crafts in society generally. A very important part of the Crafts Council’s work is supporting craftsmen and women themselves. Jackman, who is herself a painter and Wealthsmiths Summer 2020

Lifestyle

printmaker, says: “At the core of what we do is our makers. We support them at every stage – starting out, doing a craft for a hobby and when it’s their livelihood.

We run programmes to ensure they have the right business skills and there are online resources as well.”

Craft for collectors The annual Collect International Art Fair for Modern Craft and Design, another of the Crafts Council’s activities, was staged earlier this year, making its home for the first time at London’s Somerset House.

Isobel Dennis, Collect Fair Director, says: “This was the 16th year of the Collect Fair, so it’s very well established now and presents craft in a fine art context.”

The event, at which more than 40 galleries presented new work by artists from all over the world, is very much about selling craft, rather than being an exhibition where people just look.

The items on show at Collect were on sale at an average price of between £5,000 and £10,000.

“The calibre of work was exceptional and included ceramics, glass, textiles, wood, paper, jewellery plus much more,” says Dennis.

Among the galleries taking part were a number from South Korea. Dennis was particularly impressed: “They’re steeped in tradition in terms of the techniques and the materials they use, yet they create really exciting contemporary work in lacquerware, ceramics and glass.”

She continues: “There was also a lot of exciting glass from UK artists this year. Glass is hot and it’s molten when you work with it, yet you get these extraordinary pieces out of it. I am in awe of the people who can hone and harness its behaviours to create really beautiful pieces.”

Galerie Marzee from the Netherlands presented large pieces of jewellery using materials not normally associated with that craft, while multicultural collaboration Ting-Ying represented a stable of artists whose diverse works took Blanc de Chine porcelain as an initial starting point of reference.

Annette Marie Townsend

Tim Rawlinson of London Glassblowing

“Glass is hot and it’s molten when you work with it, yet you get these extraordinary pieces out of it. I am in awe of the people who can hone and harness its behaviours to create really beautiful pieces” www.sanlam.co.uk

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The Collect Open

Margo Selby

Pushing the envelope Dotted around Somerset House and interrupting the gallery collections was the stunning work of 12 individual artists who were specially selected for the Collect Open – which was sponsored by Sanlam.

Dennis says: “Each is selected after demonstrating ambition to push their own practice.”

Among them was natural history artist Annette Marie Townsend, who highlighted issues that threaten the natural world. Working in collaboration with Scott McArt of Cornell University, who provided her with beeswax found to contain pesticide residues, she crafted delicate wildflower sculptures, listing the pesticides as artist’s materials.

Dennis adds: “Edmond Byrne, who works in glass, and gold and silversmith Adi Toch experimented with how these two very different materials can be pushed together to create rather wonderful pieces – with some amazing outcomes.”

Tal Batit, from Israel, created amazing ‘ceramic carpets’. Dennis says: “They are like large tapestries on the wall but what looks like needlepoint stitching is actually ceramic.”

But the winner of the Collect Open Award was Margo Selby’s grand-scale series of handwoven artworks, which pushes the boundaries of what she can achieve on her hand loom. Each composition was woven with over 18,000 strands of cotton, Tencel and silk yarns, blended in the construction to create a textural and graphic surface.

Selby’s work was a spectacular winner among a collection of many pieces of high-level craftsmanship.

Don’t worry if you missed the Collect Fair – the Crafts Council has now launched its own permanent gallery. Go and see it as soon as you can at its headquarters in Islington, north London. Check their website for opening times at www.craftscouncil.org.uk n

The Collect Open, which was sponsored

by Sanlam, presents a platform for 12 new installations created by ambitious artists and collectives. It allows the artists to represent themselves through an original body of work made specifically for the Collect Fair. It was won this year by Margo Selby, who was presented with her award

by Sanlam CEO for Private Wealth Penny Lovell. The 12 participants were: 1. Annette Marie Townsend, handmade beeswax sculptures.

2. Paula Reason, embroidered silk panel installation.

3. Adi Toch and Edmond Byrne, a fusion of metal and glass.

4. Jacky Oliver, metalwork (focused on the concept of growing your own food in relation to the environmental challenges the world is currently facing).

5. Julia Griffiths Jones, metal, printed enamel and large-scale textiles.

6. Liana Pattihis and Sofia Björkman, a vertical jewellery installation, 3D drawings and enamelled chain.

7. Linda Bloomfield, lichen effect glazes on porcelain.

8. Lorraine Robson, ceramic installation dementia awareness.

9. Sarah Pulvertaft, Jed Green and Beatrice Mayfield, jewellery and embroidery.

10. Lucie Gledhill and Kasia Wozniak, metal and photography installation.

11. Margo Selby, large scale textile installation.

12. Tal Batit, ceramic carpet wall installations. (below)

Sources 1 https://tinyurl.com/tvlr53a 2 https://tinyurl.com/ug7deom

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Wealthsmiths Summer 2020

Investing

World on fire As the world faces a growing number of freak weather events and natural catastrophes, investors are increasingly taking action, writes Hannah Stodell

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aging fires in the Amazon and Australia, and widespread flooding closer to home this year have been a wake-up call for leaders around the world. These environmental disasters have also prompted some soul searching at an individual level as to what people may have done to contribute to them.

Interest in environmental, social and governance investing (ESG) and ethical investing (see What is ESG? box on page 15) is already high thanks to factors such as

the ‘Greta Thunberg effect’, David Attenborough’s Blue Planet series and global government policies to allocate more capital to sustainable investments.

Assets under management in UK ethical funds grew from £10.2 billion in April 2015 to £20 billion in July 2019 according to the Investment Association, the UK’s investment management trade body. And a 2019 survey by the Association found that in 2018, more than a quarter (26%) of the UK’s assets under

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management were invested using some form of socially responsible criteria.

So, could the latest global events spark an even greater interest in ESG? And in a sea of purported ‘ethical’ funds, how can retail investors ensure their money funds activities that actually benefit the planet for future generations?

Generational shift While Australia’s recent bushfire crisis has added momentum to the ESG and ethical investment movement, a number of other fundamental drivers are at play, including a generational shift towards more conscious investment approaches, says Paris Jordan, analyst in the Socially Responsible Investing team at Sanlam.

She cites the company’s What’s Your Number? survey, undertaken in 2019, in which six out of 10 people polled said it was important their investments didn’t contravene their beliefs. Among the millennial cohort (25 – 34-yearolds), that figure rose to over 80%. “Millennials are driven by different factors. We know that the majority of money is still with grandparents and parents, but at some point, that isn’t going to be the case,” she says. “Companies that want to survive, particularly investment companies, need to think about how they will cater for, and provide products for, future generations.”

It’s not just millennials; supply and demand is driving growth in the market across generations, according to Jordan, with a greater number of ESG funds and ethical products now available. She adds: “We’ve seen the investment community evolve too, so historically where they were very focused on omission or screening out particular companies, now we have a whole host of different investment approaches to choose from.”

Adopting a range of investment approaches rather than purely screening out so-called sin stocks (from companies in the tobacco, defence and gambling space, for example) can provide better risk-adjusted outcomes,

so ethics and profit needn’t be mutually exclusive, explains Philip Smeaton, Chief Investment Officer at Sanlam.

“If somebody chooses not to invest in oil and gas, it’s eradicating a lot of investment opportunities,” he says.

“If they say, we’ll invest in oil and gas companies, but we’ll identify the ones that have the most sustainable businesses, invest in the right places and have a management team that is seeking out more environmentally friendly solutions,

Photos: Alamy, Getty

Dual-class structures and company accountability

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While investors are increasingly using their financial muscle to demand action on environmental and social issues from the companies they invest in, other developments, such as the use of dual-class stock structures in company flotations, appear to be limiting shareholder rights.

This is a trend that is particularly prevalent among technology businesses, where

companies such as Pinterest and Lyft have issued dual-class stock structures in recent IPOs. In both cases, management retained more control through greater voting rights, even after the companies went public. This approach leaves other shareholders less able to hold the management to account on ethical issues.

Although it raises questions about company accountability,

Wealthsmiths Summer 2020

the power of activist investors shouldn’t be underestimated, says Sanlam’s Chief Investment Officer Philip Smeaton, pointing to Rio Tinto’s exit from the coal sector in 2018. “You don’t need to own the whole company to effect change, you just need to have enough shares so that you get a voice, and it only needs one activist to coordinate that,” he says.

Investing

What is ESG?

Forest fire: A satellite image showing how the Amazon has been ravaged

commercially developing them and making money – that can add value.”

The notion that a socially responsible investment approach means sacrificing returns has also been challenged by a mega study on the relationship between ESG and performance, published in the Journal of Sustainable Finance & Investment. It noted that the large majority of studies – about 90% – report positive findings and a positive impact on investment returns.

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Environmental: A company must be managing its environmental impact by reducing carbon emissions, waste and resources such as energy. Environmental factors also include long-term impact and sustainability.

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Social: This covers areas such as diversity, inclusion, fair remuneration and impact on the local community and economy through job creation and using local suppliers. Other areas include human rights, consumer protection and the payment of tax.

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Governance: This includes things like the management structure within the business, how it manages risk and executive remuneration.

The proliferation of ESG funds in the wider market has not escaped the attention of regulators both in the UK and further afield. In January, the US Securities and Exchange Commission identified ESG investing as an issue for examination in the coming year. The EU is also drawing up a taxonomy that seeks to standardise what sorts of investments can be labelled ‘green’ and the British Standards Institute is drafting its own Publicly Available Specification to help firms establish, implement and manage the process of integrating ESG and sustainability into investment management.

These will not be quick fixes however, and investors wishing to ensure their investments really are green should seek professional advice, says Jordan, who anticipates further growth in ESG and ethical investment in the coming years. n

“Some of our clients may have strong but differing ethical beliefs”

Incorporating ESG Smeaton explains: “ESG is an increasingly important part of investing and we incorporate this into our decision-making framework. We seek to invest in great businesses, and of course to be a great business you have to be sustainable. In 2019 we partnered with Sustainalytics, a global provider of ESG research and ratings, to further incorporate ESG risk analysis into our fundamental research.

“We recognise that some of our clients may have strong but differing ethical beliefs, so where we manage bespoke mandates we can tailor their investments to focus on the companies that best align with their wishes.”

Find out more To find out how you can invest your money in line with your values, speak to your financial adviser or portfolio manager

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Leading the European tech sector Since 2014, the UK has produced twice as many digital ‘unicorns’ as any other country in Europe. The term refers to privately owned companies valued at $1 billion or more and the UK currently sits behind only the US and China when it comes to building these fast-growing global firms. Eight more reached that billion-dollar value in 2019: Rapyd, CMR Surgical, Babylon Health, SumUp, Trainline, Acuris, Checkout.com and OVO Energy.

7 things you didn’t know about unicorns Since 1990 the UK has created 77 billion-dollar tech companies and, with many more emerging, investment in the country’s digital technology sector is now far outstripping that in any other European country

Unicorns are everywhere While London is the leading city for creating unicorns in the UK, having produced a total of 46 since 1990, it is by no means the only one.

Manchester (Europe’s fastest-growing major tech cluster), Oxford, Cambridge, Edinburgh and Bristol have produced a combined total of 20. Of the latest companies to join the list, OVO Energy adds to Bristol’s tally, while Cambridge-based CMR Surgical pushes Oxbridge’s combined total to 11.

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Attracting investment The UK’s unicorns are a result of digital know-how that is attracting a lot of attention around the world. Research from Tech Nation and Dealroom.co shows that investment in UK digital tech companies reached £10.1 billion in 2019, a third of the total amount invested in the whole of Europe. Investors from the US and Asia were particularly active, providing £4.9 billion. In fact, UK-based firms received more venture capital investment than Germany and France combined.

Technology

Creating jobs The rapid growth in the sector is creating a lot of jobs.

With more than 2.1 million people working in UK digital tech, the tech economy is a bigger employer than sectors like hospitality (1.3 million), construction (1.9 million) and financial services (1.2 million), according to Tech Nation’s A Bright Tech Future report. In fact, the UK is one of the top destinations for attracting global talent and launched the first technology visa.

Pipeline of unicorns In total, since 1990, 77 unicorns have been created in the UK, but there are many more waiting in the wings. The number of ‘future unicorns’, identified as companies valued at between $250 million and $800 million, rose by 27% to 95 in 2019, showing that the pipeline of prospective billion-dollar tech firms is healthy and growing. They include companies like Atom bank in the North East of England, Depop in London and Crisp Thinking in Yorkshire. In fact, 45% of the UK’s high-value scale-ups are based outside of London – a positive sign that all regions in the UK are building up a pipeline of global tech leaders.

Economic contribution The digital tech sector’s contribution to the UK has rocketed in recent years. Its GVA, or gross value added, contribution (gross domestic product + subsidies - taxes) is now growing six times faster than that of the wider economy.

It contributed £149 billion in GVA in 2018, accounting for 7.7% of the economy. Over the past eight years, digital tech’s GVA has risen by 43% from £104 billion.

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Our best-performing sectors Investment is responsible, in part, for a surge in our bestperforming sectors – fintech, artificial intelligence (AI), deep tech (based on substantial scientific advances and high-tech engineering innovation) and clean energy. Investment in fintech firms increased by 100% last year to £4.1 billion. AI and deep tech investments reached £2.4 billion, while the smaller clean tech sector attracted just short of £700 million. Emerging sectors where the UK holds a commanding position include agritech and healthtech, which are disrupting agriculture and healthcare respectively.

Find out more To find out how you can invest your money with confidence across all sectors, speak to your portfolio manager or visit www.sanlam.co.uk

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Financial planning

Living a 200-year life Some scientists say the first person to live to 200 has already been born. Laura Sagar asks what it means for our lifestyles and our finances

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ll of us, especially those born before 1975, will be familiar with the label ‘middle-aged’. But Professor Stuart Kim of Stanford University has made a prediction that could obliterate this age bracket and mean we’re still in early adulthood at the age of 95: “I think there are those alive today who will live to be 200 years old.”

Our average lifespan has doubled since the 19th century.

Initially it was thanks to public health improvements such as childhood immunisation, while great 20th-century developments like the discovery of penicillin and, more recently, treatments for conditions such as heart disease, have improved people’s health in later years.

With such a rapid increase, the idea that we may live for two centuries no longer seems so far-fetched.

The most recent figures from the Office for National Statistics (ONS) continue to show a gradual rise in life expectancy. A boy born in the UK can expect, on average, to live for 79.3 years and a girl for 82.9. But the number of people living into their 90s has increased rapidly over the past 30 years – from just over 212,000 in 1987 to more than 584,000 in 2018. And there are now more than 13,000 people over the age of 100.

While most of us can’t expect to live to 200 just yet, we should all be planning financially for the possibility that we will live longer than our parents. But last year Sanlam’s What’s Your Number? report revealed that, currently, millions of people are wildly underestimating the scale of the task.

The average annual amount that UK adults believe they will need in retirement is £34,000 and they are confident

that a pension pot of £355,000 should be enough to achieve this. The reality is that such a pension pot would only earn them around £13,000 per year.

A hard knock life If advances in medical science continue, a good pension will be invaluable because we can certainly hope for many more happy and healthy years in which to spend it.

Wealth Planner Lisa Lloyd says: “I would hope that we have ongoing good health and quality of life for a longer period of time. Currently our health starts to deteriorate at 80 so if, for example, someone were to live as long as two centuries, you’d hope that decline would be pushed back to something like 150.”

She adds: “We all need to adapt to longer lifespans and if people are going to start living up to 200 years then they’d need to work as long as possible. People would have to retire a lot later than 65. State retirement age is now 67 or 68 and we’ll continually see that increasing, probably up to age 70 and beyond. But you can only work if you’re in good health, so that’s always going to impact financial planning.”

Health plays a huge role in determining our quality of life and, considering that it tends to deteriorate in our 80s and 90s, it means that our final years are often spent in care. Lloyd says: “In terms of financial planning, the whole process is going to be impacted by someone’s health.” According to Age UK, the average cost of a care home is currently around £600 a week and over £800 for a place in a nursing home.

And it’s not just our finances that could be put under

“I think there are those alive today who will live to be 200 years old”

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strain by a 200-year lifespan but also our relationships.

Richard Watson, Futurist and Founder of What’s Next adds: “Back in the day the phrase ‘until death do us part’ probably meant 40 or 50 years. Now it can mean 60 maybe 70. I’d be surprised if 170 or even 120-year relationships were sustainable.”

The latest divorce figures from the ONS counted 90,871 divorces of opposite-sex couples in 2018. If we are going to maintain our relationships for much longer, we’ll need to work much harder at them – something made much easier by a sound financial foundation. Or perhaps we’ll bin the old conventions of marriage and monogamy altogether, opting instead for a more liberal approach.

Preparation is key While it may be more realistic to expect a lifespan of 100 years rather than 200, preparing for extra years of life has become a necessity. It’s particularly crucial for younger generations, who are predicted to live longer, yet are also faced with smaller state pensions that will arrive much later in life.

Still the approach to financial planning remains largely the same. “Planning early is always key,” says Lloyd.

By adequately preparing, we can look forward to years of travel and relaxing with friends and family members. “Ideally people should start planning from their 20s,” Lloyd says, “but they often don’t because they have just got some financial independence and want to spend it on having fun. Also, their salaries are still quite low, so they don’t have as much money to put towards financial planning because they’re trying to get onto the property ladder or they’re renting, both of which are very expensive.”

A large number of people are putting off saving for the future. Lloyd says: “Everything is so expensive nowadays that

Japan’s supercentenarian Kane Tanaka is the oldest person in the world at 117

people only tend to seriously consider planning in their 40s or 50s, which shortens the investment timeframe.

Ideally financial planning should be done in our 20s or 30s to give us more time for our money to adequately grow.” If we want a decent retirement while we are still young and fit enough to complete our bucket list, Lloyd advises us to “save as much as you can as early as possible in life. When you do this, it gives you choices in terms of retirement and having enough money to go on the holiday that you’ve always dreamed of.” n

Find out more To find out more about planning for a longer life, speak to your financial adviser, or visit www.sanlam.co.uk

Photos: Alamy

Rise of the centenarians

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The Queen has been getting busier as the number of people eligible to receive telegrams on their 100th birthday has increased. In 2002 there were just 7,630 centenarians in the UK according to the Office for National Statistics, but by 2018 that figure had jumped to 13,170.

Surprisingly, despite that longterm trend, the figure has been falling for the past couple of years, but we shouldn’t expect that to continue – it was caused by the lack of babies born during the First World War. Government forecasters are predicting a big spike in the number of those reaching 100 when they publish

their figures for 2019 and 2020.

That’s because the birth rate rocketed after demobilisation. The number of births spiked in the latter half of 1919, approximately nine months after the end of the war. There were 45.4% more babies born across the UK between

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mid-1919 and mid-1920 than in the previous 12 months.

This, however, is an interesting historical anomaly. It is the underlying figures, which show a consistent increase in the number of centenarians, that should make us all stop and think.

Classic cars

Getting behind the wheel Prices for classic cars soared after the financial meltdown of 2008 but the market has stabilised more recently. So, where do you buy a classic car and what makes one valuable? Jess Unwin finds out more

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wning a classic car is clearly a driving ambition for some – and the proof of that was delivered when the world’s most expensive car sold at auction, a 1962 Ferrari 250 GTO, fetched a price of more than £37 million.

Sold in 2018 at RM Sotheby’s Monterey auction in California, the car is one of just 36 of its kind ever built and has a motor racing pedigree that includes 15 first-place finishes during the 60s.

Last summer, another Monterey car sale saw an Aston Martin DB5 that was used to promote the James Bond film Thunderball go under the hammer. Its sale price was more modest at £5.2 million – but still high enough to cause even 007 to raise an eyebrow!

Money is apparently no barrier for Bond who is back behind the wheel of a DB5 in his latest blockbuster

No Time to Die. But don’t despair, if you dream of getting in the driving seat of a classic, there are plenty of other desirable motors on the market that could be within your budget.

Classic dilemma Exactly what makes a car a classic is open to debate as there’s no fixed definition. In the UK, HM Revenue and Customs categorises a car as a classic if it’s over 15 years old and has a value in excess of £15,000, but some insurance companies regard any vehicle that is considered collectible a classic, regardless of age.

Peter Haynes, a spokesman for RM Sotheby’s, says the majority of classic car trade happens in western Europe and the US, but adds there’s increasing activity in Hong Kong, Japan and China.

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Aston Martin DB5 that was used to promote the James Bond film Thunderball

Ford Sierra Cosworth

Ferrari Testarossa

Porsche 911 Turbo

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Finding the car you want at the price you want can often be done by using dealers or an auction house. Peter says: “Auction house car specialists and dealers have the connections and contacts to help you if you’re interested in a particular kind of car. Auction houses have transparent commission fees, which in the case of Sotheby’s is 15% for buyers, a typical percentage for a premium auction house.

Dealers also sell on a commission basis.”

James Constantinou, the star of hit Channel 4 show Posh Pawn, is an expert on investing in classic cars. He says the well-established classic car websites are a good hunting ground too: “If nothing else, do some research online so you can benchmark pricing.”

And while London-based auction houses have great reach in the classic car market, he suggests considering provincial auction firms. He explains: “Sometimes that’s where you can find a bargain because they don’t have international collectors vying for the stock.”

Lower prices The global classic car market has seen a downwards readjustment in prices for many cars in recent years.

Demand for cars costing more than $1 million collapsed at the 2019 Monterey Car Week, according to Hagerty, which compiles an index that tracks prices for collectible cars.

Haynes says: “There was a time after the crash in 2008 when classic cars felt like a much safer place to invest than stocks and shares or property. The market was in a bit of a bubble and it overheated. Prices just kept going higher and higher and in the end that was unsustainable.

“Prices have been more stable for the past two to three years, but the classic car market is a tapestry of little niches and some areas continue to do well.”

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Classic cars

He continues: “Value in the market is usually driven by two factors. The first is the age profile of the buyers. Many of them coming to the market now are 40-something and covet cars from their teenage years – the Ferrari Testarossa, the Lamborghini Countach or the Porsche 911 Turbo. So, there’s recently been a rise in the market for cars made in the 1980s and 1990s.”

The other key driver is the rarity of any given car: “For example, Ferrari’s manufacturing approach is artisan and hand-built, particularly prior to the 1980s, so they’ve never made cars in big numbers. That’s part of why their cars are a good investment.”

Condition and provenance Condition is important to consider with classic cars because restoration is expensive and could result in negative equity for an owner. A car previously owned by someone famous or one with a colourful history can also have bearing on value – especially if there’s good documented proof (provenance).

Haynes says: “Originality is another value point and people will ask if a car has ‘matching numbers’, which means the identification numbers of the car’s components match and are original.” If a car isn’t in original condition, then sympathetic restoration is important, says Haynes.

While condition and provenance are constant factors, what’s on trend is always changing. Constantinou says: “Right now there’s global interest in some British models that until recently weren’t considered classics by many. A 1980s Ford Sierra Cosworth sold recently for £122,000.”

Luxury and style James Kenneth, who works for public relations company KBA, is a classic car owner. His pride and joy is a RollsRoyce Silver Shadow 2. He says: “I bought it because I wanted something that defined the utmost in luxury and style and made me feel extra special when I drove it.

“I don’t expect the vehicle to make me loads of money, but I do expect it to appreciate in value as the model is very collectible and sought after in good condition.

“If I had bought it purely for investment, then it would definitely be kept in an air-sealed garage. I understand those who do that, but it means many classics are off the road and not appreciated by the public. In my book, there is no fun if you cannot take them out for a spin.”

A classic should be bought for the joy of it and not just as an investment. That way, if you don’t make money on it at least you have the joy of driving a beautiful machine. n Find out more A classic car can be fun but if you’re interested in a more bespoke portfolio, speak to your portfolio manager, or visit www.sanlam.co.uk

5 classic cars to buy Many more modern cars are now considered classics and becoming increasingly sought after. Here’s a selection of vehicles chosen by Channel 4’s James Constantinou to suit a variety of budgets.

Jaguar XJS This luxury grand tourer was manufactured in Britain between 1975 and 1996. The original design was by Malcolm Sayer – one of the first designers to apply advanced aerodynamic principles to cars.

Expect to pay £5,000 – £12,000.

Porsche 924 Made 1975 – 1988, it was the first roadgoing Porsche to have a front engine rear wheel drive configuration. If you can find one with a low mileage, a good investment at £7,000 – £12,000.

Triumph Stag Another British car but styled by Italian designer Giovanni Michelotti. Built between 1970 and 1977, a good example of this three-litre engine V8 car will probably cost £10,000 – £15,000.

Porsche 911 Turbo (996 series) One of Constantinou’s personal favourites and a car that he believes is great value at the moment. Built between 1997 and 2006, it’s selling for £25,000 to £50,000.

Lamborghini Espada Just 1,200 of this Italian four-seat grand touring coupé were made between 1968 and 1978. The iconic 1970s wedge-shape styling is now very much in vogue. Owning one of these will cost you £70,000 to £150,000.

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A nation supports its heroes

Wembley Stadium is usually a place to honour sporting giants but in March the iconic building was lit up in vivid blue to support the country’s new heroes – the NHS staff on the front line in the battle against Covid-19. More than 20,000 former NHS workers volunteered to return and treat victims of the pandemic. Just days after this picture was taken Health Secretary Matt Hancock revealed that NHS workers were already giving their lives.

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Photos: Alamy

Big picture

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Can investors trust the media?

Investors are swamped with tips in newspapers, on television and online, but are media pundits worth their salt? asks Paul Bryant

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he media has always fed off individuals’ insatiable appetite to take a punt on the stock market – offering ‘expert’ tips and forecasts in a bid to sell newspapers to investors or direct eyeballs to a television show or website. There is little doubt these forecasts are highly influential.

In his book, Irrational Exuberance, economist and Nobel laureate Robert Shiller wrote: “The history of speculative bubbles begins roughly with the advent of newspapers... significant market events generally only occur if there is similar thinking among large groups of people, and the news media are essential vehicles for the spread of ideas.”

Sometimes, these ideas are gloriously right. In January 2013, UK newspaper The Independent included computerchip maker ARM Holdings in its annual list of ‘10 share picks’ when the share price was 768p, quoting Charles Stanley’s Chief Economist Jeremy Batstone-Carr: “I think my stand-out (pick) would be ARM Holdings, but it’s far from cheap.” In September 2016, ARM was snapped up

by Japanese investing giant Softbank for 1,700p per share, a 221% jump in just over two and a half years.

When they get it wrong But there are also notorious clangers. And sometimes from highly credible commentators. Writing in the New York Times on US election night 2016, another Nobel laureate economist, Paul Krugman, wrote: “It really does now look like President Donald J. Trump, and markets are plunging (the S&P 500 fell over 6% from its high to its low that day) … If the question is when markets will recover, a first-pass answer is never.” The market ‘plunge’ turned out to be nothing more than a one-day blip. And from the low of that blip on 9 November 2016 to 25 February 2020, the S&P 500 was up 160%.

So, is there actually an opportunity for private investors to generate ‘alpha’ – or market outperformance – by following the calls of experts rolled out by the media?

It is a question that has intrigued a number of academics,

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with one of the most prominent and specific studies conducted in 2017 by Professor David H. Bailey and others, who produced the paper, ‘Evaluation and Ranking of Market Forecasters’.

They analysed 6,582 forecasts of the US stock market, made between 2005 and 2012, by 68 ‘experts’ – including many prominent investment professionals who wrote in the media. And the results were not pretty.

On average, around 46% of forecasts were accurate.

Only 23 of the 68 forecasters (34%) averaged over 50% accuracy, 11 over 60% and just four over 70%. Forty-five forecasters (66%) had an accuracy under 50%, with 18 under 40% and five under 30%.

Indistinguishable from chance Bailey even suggests that the results might overstate accuracy. In a follow-up blog post, he wrote: “One question that remains from this study is to what extent our analysis, or those of any other similar study, are biased by the simple fact that unsuccessful forecasters tend not to remain in the business for a long period of time. Thus long-term accuracy scores and rankings (the only ones that are statistically significant) necessarily omit those forecasters who have dropped out … it does mean that all rankings and scorings may tend to be optimistic.”

When asked to comment on the implications of the research, Bailey is unequivocal: “Our conclusion is very clear. By and large most of these forecasts are indistinguishable from chance.”

He is also highly sceptical of how practical it would be for a private investor to profit from the forecasts of ‘winners’, saying: “Now while we did identify a small cohort of successful forecasters, who in theory could provide a private investor with the basis of a successful investment strategy, how on earth do you identify these winners early enough so their tips can be followed? I would also worry about the ability of any forecaster to maintain a strong performance for an extended period. There is

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Investing

certainly evidence to suggest that investors can ‘lose their touch’, or the investment technique they use becomes ineffective over time.”

To reinforce this point, Bailey highlights the findings of S&P Dow Jones Indices on US equity funds over three consecutive 12-month periods between 2014 and 2017. It found that out of 563 funds that were in the top quartile in the first 12-month period, only around 6% of these funds managed to stay in the top quartile by the end of the third period. Over five years, less than 1% of funds maintained their top quartile performance.

Bailey concludes: “If our research has helped the investing public realise that these short-cut techniques (aimed at beating the market) simply won’t work, then we’ve accomplished something useful. In a way it should be obvious that a market tip which is publicly announced is not exactly going to be information so valuable that a private investor can take advantage of it, particularly in today’s world of algorithmic trading where professional investors are spending huge amounts of money scanning for information that can give them an edge.”

The professional’s edge Philip Smeaton, Chief Investment Officer of Sanlam Private Wealth UK, isn’t surprised by the results of Bailey et al’s research. He says: “It may surprise some private investors, but a ‘hit rate’ – the ratio of profitable to total investments – of 55 – 60% is really good, even for professional investors.”

But he stresses that hit rate is only one piece of the investing puzzle, and often, private investors don’t realise the importance of some of the other pieces.

First, says Smeaton, hit rate is not just about investing skill level, but also to do with size of portfolio: “The chance of a single investment decision being right for a skilled investor is only marginally better than a coin toss. To make sure that this skill comes through in the results, many investment decisions need to be made – much more than would typically be made by a private investor – essentially diversifying away the luck element and allowing investment skill to dominate.” So, it would be incredibly hard for a private investor to achieve any sort of consistent hit-rate simply because they don’t have the time to make a sufficient number of diversified investment decisions.

Second, and perhaps even more importantly, is how ‘winners’ and ‘losers’ are managed. Smeaton says: “I doubt very much that, at the time of making an investment, private investors are thinking there is at least a 40 – 45% chance of that investment having a negative return. And probably even less thought goes into how to manage those losers. But that is what investment professionals spend a lot of time thinking about. We want to make sure that when we’re wrong, the damage is mitigated – that we’ve understood the risks around the size of the position and

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Investing

the potential for downside in the share price. Also, when we’re right, we want to make sure a winner has a good chance of having a significant impact on a portfolio.”

To illustrate the point, Smeaton cites the Sanlam approach of investing in ‘high-quality, resilient companies’ – for example, those with a strong balance sheet, steady margins that don’t move dramatically through the business cycle, and which are protected to a degree by high barriers to entry. “Even if an investment in such a company turns out to be a loser,” says Smeaton, “it’s not going to go wrong in a disastrous way,” He also cites the professionals’ advantage of being able to understand the potential downside of an investment in a lot more detail than a private investor would. For example, Sanlam is invested in Intercontinental Hotels, a business clearly exposed to a downturn as a result of the coronavirus. But Sanlam’s analysts have the skills and resources to model various scenarios that may play out, assess the likelihood of each scenario occurring and the detailed financial impact they would have on Intercontinental Hotels – enabling Sanlam to take an appropriate decision on what to do with this holding.

This exercise would be beyond nearly all private investors.

When asked specifically about the usefulness of investment tips in media, Smeaton says that no one should ever forget that the media, even the financial media, is primarily about entertaining. He says: “Ultimately, a media company’s aim is to sell advertising space, newspapers or subscriptions, and it does that by entertaining. Its primary focus is not to help people make money and it’s not judged on that basis. The focus is just about moving from one shiny new idea to the next.”

Put another way, a headline reading ‘Buy a reasonably priced diversified investment portfolio attuned to your risk profile and personal goals’ is unlikely to generate many clicks or increase readership. And even if you were to base investment decisions on the advice of financial journalists, don’t expect them to be accountable for bad calls.

Faced with a scarcity of successful market tipsters, an almost impossible task of picking these winners, and the portfolio management challenges described by Smeaton, it looks like chasing alpha by following tips in the media is a fool’s errand for the private investor. n

Find out more To find out more about investing to meet your needs, talk to your portfolio manager, or visit www.sanlam.co.uk

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Pensions

Finding your lost pensions There is estimated to be around £37 billion sitting in forgotten pensions in the UK, writes Ruth Jackson-Kirby. So, could any of it be yours?

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he key to successful retirement planning is knowing how much income you’ll need when you finish work and making sure you save a large enough pension pot to provide it. But many of us are overlooking a vital part of our retirement planning – forgotten pension pots.

Research by Profile Pensions has found that 25% of

people aged under 55 have lost track of at least one pension. At an average value of £23,000 those lost pensions could make a huge difference to your retirement planning. Locating those pensions could mean you can afford to retire two and a half years earlier.

“Saving enough for a comfortable retirement is probably the biggest financial challenge facing workers in the UK,”

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“Saving enough for a comfortable retirement is probably the biggest financial challenge facing workers in the UK” says Michael Angus, Wealth Planning Director at Sanlam.

“It’s key to ensure you know where all your pension funds are to help give you as successful a retirement as possible.”

Different pots So, why are so many of us losing our pensions? The first issue is that we all have more pension pots than we used to.

Gone are the days when you worked for the same company for 40 years and retired with a gold carriage clock. The average UK adult has 11 jobs in their lifetime, according to government figures. If you start a new pension each time that’s a lot of different pots to keep track of.

Then there is the issue of auto enrolment. While it means we are all saving more for retirement, many of us are doing so mindlessly. Our employer sets up the pension and we know little about it – many employees don’t even know who their pension provider is.

To make matters worse we are all changing address more often. Government statistics estimate that you will move house around eight times. Forget to notify all your different pension providers of your change of address and you will stop receiving your statements and documentation.

All this means the number of lost pensions is rising.

The government estimates that, by 2050, there will be 50 million lost or dormant pension pots.

In order to have a clear picture of your retirement you need to know the value of your pension savings. With an average £23,000 currently sitting in each of those lost pensions – or a total of £37 billion – it is vital you check if you have a missing pension pot.

“The good news is finding your forgotten pensions is relatively simple”, says Angus. “Start off by contacting the Department for Work and Pensions (DWP)’s Pension Tracing Service.”

You will need details of all your employers and the dates when you worked for them. It can then provide you with the details of any pension provider or scheme associated with your employer when you worked there.

It isn’t just workplace pensions that can go astray. You may have also forgotten the details of a personal pension that you set up at some point in your working lifetime.

“If you are looking for a lost personal pension, ask the Pensions Advisory Service for help,” says Angus. “They will need as much information as possible, including any old paperwork you have. A financial adviser can help you

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gather together the information you need and help you hunt down lost pensions if you aren’t sure where to start.”

Once you have gathered the names and contact details for your old pension providers, you will need to get in touch with each of them to find out if they hold a pension in your name and, if so, the value of the pot. It is also worth asking them for details of any management charges you are paying, and would there be any charges if you wanted to transfer the pot. If you have a financial adviser, they may be able to get in touch with pension providers on your behalf.

Now you know where all your pension savings are, the next question is should you bring them all together into one pot? This could make it easier to keep track of your retirement savings and, potentially, reduce the charges you are paying if you have lots of pots. But, don’t assume it is the best plan. In some cases, you are better off leaving your retirement savings where they are.

For example, you could lose out on a valuable guaranteed annuity rate or additional tax-free lump sum entitlements above the standard 25%. If your pension

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Pensions

5 steps to locating a lost pension Contact the Pension Tracing Service.

They can give you details of workplace pension schemes connected with your old employers. l Use the Pensions Advisory Service for help finding lost personal pensions. l Contact pension providers to see if you have a forgotten account with them. l Once you have found all of your pensions, speak to a financial adviser for help deciding whether to consolidate them. l Future proof your pension by making sure your employer and pension administrator know if you move home or change your name. l

“It’s key to ensure you know where all your pension funds are to help give you as successful a retirement as possible” dates from the 1990s it could come with a guaranteed annuity rate that was in line with rates back then when rates were far, far higher than they are today. In that scenario, moving your money would mean you were taking an axe to your retirement income.

Keep your benefits Ensure you fully understand the benefits of a pension and what you will lose if you leave. Also, check if there are any exit charges before you decide to consolidate your pension pots.

“Consolidating all your pensions can seem an attractive proposition and can bring peace of mind,” says Angus.

“However, it is essential that each plan is properly analysed by a qualified adviser to ensure transferring it is the right option and that valuable benefits aren’t being given up.”

Finally, once you have found all your pensions and brought them together, don’t lose them again. Make sure all your pension providers and your employer have the correct contact details for you. Then make sure you have a list of them and inform them if you move to a new house or your details change. Ensuring they have up-to-date details for you means they can stay in touch and it will minimise the risk of you losing your pension.

“While you can do all of this yourself, a financial adviser will be able to guide you through each step to help get your pension affairs in order,” says Angus. n Find out more To find a missing pension or to discuss your existing arrangements, talk to your financial adviser, or visit www.sanlam.co.uk

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Entrepreneurs’ relief...

The reform of entrepreneurs’ relief will leave some business owners owing more Capital Gains Tax, writes Andrew Strange

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Tax

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f you’ve been working hard for years to build up a business, you may have your eye on a lucrative exit that will allow you to enjoy some of life’s luxuries. But if you’re among the most successful business owners and plan to sell your company for millions, Chancellor Rishi Sunak’s decision to reform entrepreneurs’ relief could leave you facing a bigger Capital Gains Tax (CGT) charge and in need of a new financial strategy.

While the Chancellor decided against abolishing the relief, which reduces the amount of CGT owed on the proceeds of a business sale from 20% to 10%, he did limit the lifetime allowance on gains on which this benefit can be claimed – from £10 million to just £1 million. While the vast majority of owners will be breathing a sigh of relief, the most successful, who have built very valuable businesses, will need to consider what they can do to limit their liability.

Entrepreneurs’ relief has come under fire from organisations ranging from the Association of Accounting Technicians and the Resolution Foundation to the Office of Tax Simplification (OTS). They said it failed in its purpose of encouraging entrepreneurialism and benefited just a small number of wealthy people. The OTS’s Business Lifecycle Report said: “Other reliefs appear to be designed to encourage investment in young and growing businesses, or to preserve existing businesses from breakup in the event of succession.

Entrepreneurs’ relief does not seem to achieve either of those objectives.”

Alternatively, you could pay yourself a dividend and, although you will have to pay an income tax charge, you could then invest the money into an Enterprise Investment Scheme (EIS) or a venture capital trust.

Because the government wants to encourage people to support small businesses, you would then receive 30% income tax relief.

Make a plan Sanlam Senior Wealth Planner Carl Drummond says: “The change to entrepreneurs’ relief is only going to affect about 5,000 individuals so there’s going to be a limited number of people affected by the change. Most entrepreneurs that sell up are selling for under a million pounds and will still get the allowance. For those over the million pounds they will need to think about how they structure the sale in a little bit more detail. They will need more advice.

“The Chancellor and HMRC need to get tax from somewhere. It’s good that the Chancellor is getting some money back but if you are a small business owner and you are building up the business, will the change disincentive you from keeping going after its value rises to a million pounds? My personal view is probably not. But maybe you’ll restructure how you actually sell it.

So, you might take out further pension contributions for example before you actually get to the point of sale. Rather than just focus on the business you might need to do more financial planning around how you actually structure the deal in the lead up to the sale.

“If you put it into perspective, if the company was sold for £10 million that means on £9 million you are going to pay 20% and on £1 million you are going to pay 10%. The reality is not actually too bad because there are other tax incentives you can take advantage of outside of entrepreneurs’ relief. You are going to have to pay a bit more tax but it’s about planning the sale properly and taking financial advice to work out what the tax position is, and then mitigating its impact.”

It is also worth remembering that the Chancellor was under pressure to abolish the relief and this might happen at some time in the future, so all entrepreneurs should be alert to the possibility that their financial plans will need to change before they sell. n

“The reality is not actually too bad because there are other tax incentives”

What a relief Ignoring calls to abolish the relief, the Chancellor said it was valuable: “We need more risk taking and creativity, so we are not going to fully abolish entrepreneurs’ relief but we will reduce the lifetime limit from £10 million to £1 million. This will save £6 billion over the next five years and this money will be invested straight back into innovative businesses and technology.”

If you think you may now be facing a bigger tax bill, you will need to start planning in advance of your sale to take advantage of other tax breaks offered by the government. For example, a financial adviser might suggest that a company begins to pay into a pension for you. This can both provide a tax-efficient way of withdrawing money and reduce the amount of corporation tax the company has to pay.

There are other legitimate tax breaks that an adviser might suggest, depending on your circumstances. For example, if you plan ahead, you could give half of your shares to your spouse or civil partner, who will also then be entitled to entrepreneurs’ relief as long as they have owned the shares for at least two years.

Find out more To discuss succession or selling your business, contact your financial adviser, or visit www.sanlam.co.uk

www.sanlam.co.uk

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Last word

Main image: Dunorlan Park.

Top right: Diana Rigg and co-star George Lazenby as Mr and Mrs James Bond Bottom right: The Pantiles

A town fit for Mr and Mrs Bond

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t’s the home of Oscar Wilde’s Cecily in The Importance of Being Ernest, the favoured residence of Diana Rigg as the future Mrs James Bond (in On Her Majesty’s Secret Service, Tracy Di Vincenzo looks forward to living as “Mr and Mrs James Bond of Acacia Avenue, Tunbridge Wells”) and has historical links with some of literature’s best known names, including Forster, Austen and Dickens.

But Royal Tunbridge Wells isn’t just popular in print, on stage and on screen. In fact, the town in western Kent received its ‘Royal’ prefix in 1909 to celebrate its popularity among members of the royal family – in particular, Queen Victoria – one of just three towns in England to be granted a royal title.

Springing forth But the town’s origins are much less grand. In 1606, one of King James I’s courtiers, Dudley North, was on his way back from an estate near Eridge when he noticed reddish-brown waters on the ground, from the thenunknown Chalybeate Spring. Slightly worse for wear after an evening of merriment, North drank the water

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and, feeling rejuvenated, declared it a health-giving spring. As word spread, the area was cleared of brushwood, the wells were sunk and in the 1680s a 160m-long promenade, leading from the original spring, was built, known as the Walks – better known today as the Pantiles.

By the mid-1700s, the area was a fashionable resort for those of high social standing. Some 300 years later, Royal Tunbridge Wells (whose previous names included Frant Wells and, later, Queen Mary’s Wells, named after Queen Mary II) remains a popular tourist destination. The Pantiles is now filled with cafés, restaurants and boutiques, and there is a bandstand that hosts live jazz music throughout the summer.

Visitors today can still indulge in a favourite 18th-century tradition, sampling the water of the Chalybeate Spring, served by a costumed ‘Dipper’. But be warned: with its mythical health-giving properties comes a strong flavour of iron.

A walk in the park At first glance, Dunorlan Park might simply appear as a picturesque spot for a family day out, but there’s a lot Wealthsmiths Summer 2020

of history behind these 78 acres. In the 1850s, the land was purchased and developed by Henry Reed, who built a mansion on the grounds, which he then had landscaped by Robert Marnock, one of the leading landscape designers of his day, to complement the grandeur of the house. In Reed’s final years at Dunorlan, the grounds were used by local priests to hold open-air services.

Reed’s mansion was also used to house troops during the Second World War (who were accused of using the statues lining the avenue to the fountain for target practice). The house was damaged by a fire in 1946 and, though saved, was demolished by the council in 1957.

The landscaped park, however, remains there to this day, and boasts a six-acre lake, water fountain and Grecian temple, which held the famous ‘The Dancing Girl’ statue, until it was stolen in 2006. And, as a result of local landowners attempting to establish rival springs upon the discovery of the one found by Dudley North, Dunorlan even has its very own Chalybeate Spring, a fitting reminder of the town’s origins. n

Photos: Alamy

In our regular look at a town that is home to a Sanlam office, we look at the history of Royal Tunbridge Wells

Sanlam has offices across the UK. To find your nearest Sanlam office, simply visit www.sanlam.co.uk/contact-us You can also call us on 0117 975 2125 or email getintouch@sanlam.co.uk

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