Tag: investment


what do ESG and impact investing mean for investors?

Sustainable investing has grown rapidly over the last couple of decades. Investors are increasingly committed to the social and environmental impact of where they put their hard- earned money. Getting good financial returns and having a positive impact on the world are not mutually exclusive. Impact investing and ESG investments allow investors to ‘kill two birds with one stone’, as they say

American financial association SIFMA estimates the market size of sustainable investments to be $8.72 trillion. That figure was calculated in 2016, so it’s likely to be substantially larger than this now.

ESG and impact investing are two terms frequently confused in the world of sustainable investing. They’re often used interchangeably, which is a shame because it risks obscuring what the different terms actually mean; they are quite different. ESG is a framework for determining the impact of an investment whereas impact investing is an approach.

ESG stands for environmental, social and governmental. It’s a framework that can be integrated in the risk-return analysis of different investment opportunities. By drawing from a variety of data, some gathered from company and government disclosures among other sources, it allows investors to examine how companies manage risk and opportunities in three key areas:


This refers to a company’s impact on the environment. It looks at certain aspects of a company’s operations, such as how they dispose of their hazardous waste or how they manage carbon emissions.


Does the company take measures to have a good social impact? This can include philanthropic and community focused activities or any measures the leadership takes to promote diversity in the workplace.


This deals with the leadership and strategy of a company. It addresses aspects such as staff pay and communication with shareholders.

An ESG framework is a valuable tool that may be used to evaluate how certain behaviours can affect a company’s performance. However, it’s not an investment strategy in and of itself. With ESG, the wider impacts of investments are considered but financial performance still takes precedence.

Impact Investing
Impact investing means using investments to cause positive social or environmental change. Examples include supporting access to clean energy or working to improve social mobility by investing in companies operating in underprivileged areas. In contrast to ESGs, in impact investing financial performance is secondary to the overall social or environmental impact.

The financial return of impact investments varies between cases. Some investors intentionally invest for below market rate returns in line with their strategic objectives. Others pursue competitive, market-rate returns. According to GIIN’s 2017 Annual Impact Investor Survey, these account for the majority, with 66% of impact investors aiming for market rate returns.

Because maximum returns are sacrificed in favour of investing for a particular social or environmental agenda, there’s the possibility that certain opportunities may underperform relative to other widely available options. When maximum profit isn’t the goal, sometimes the financial returns can suffer.

This said, impact investing shouldn’t be confused with charity. The objectives of impact investing are financial as well as social and environmental. There are many companies whose operations have a positive impact on the world and investing in these is an effective way of contributing towards long term social and environmental progress.

The shift towards impact investing and ESG highlights a growing desire among investors to do well by doing good. They are increasingly a core offering, rather than something that is ‘nice to have’. However, as with any investment decision, it’s a good idea to do plenty of your own research and seek financial advice to see how ESG and impact investing could fit with the rest of your portfolio.


what does the nil rate band really mean for me?

Changes to inheritance tax (IHT) came in earlier this year, affecting the allowance for those wanting to pass on their home to members of the family. But as the changes are being rolled out over the next few years up to the 2020/21 financial year, it can be hard to know if and how the changes will affect you.

The current amount you’re able to leave in your estate without incurring IHT is £325,000, known as the nil rate band (NRB). Anything above this amount incurs 40% tax, with certain exceptions, such as gifts to charities, being able to lower that percentage. Any transfers between spouses or civil partners are exempt from IHT even if your estate exceeds the NRB, with married or civil partnered couples having £650,000 – twice the NRB limit – to offset against their combined estate.

Introduced in April this year, the residence nil rate band (RNRB) adds a further £100,000 to the NRB. This will then increase by £25,000 each year up to 2020/21, when it will reach £175,000. Each person will therefore have a maximum allowance of £500,000, with surviving spouses having an allowance of £1 million to offset against IHT when their partner’s allowance is transferred to them.

The RNRB differs from the NRB in that it doesn’t apply to lifetime transfers, such as transfers into trusts or gifts given by an individual within a period of seven years before they died. This means that whilst the NRB could potentially be consumed through gift-giving in the last seven years of a person’s life, the RNRB would still be fully available.

Back in 2015, when the RNRB was first discussed, there were concerns over discouraging older couples from downsizing or selling their home to move in with a relative or to residential care. Since then, however, the rules have been readjusted so that the allowance can still be utilised by those who sell up or move to a smaller home before their death, as long as the deceased leaves the downsized property or equivalent valued assets to their direct descendants.

Whilst there’s no limit on how much time passes between the downsizing or property sale and death, the transaction needs to have taken place after 7th July 2015 in order to qualify. RNRB also only applies to one property which the deceased needs to have lived in at some point before dying, meaning that buy-to-let properties or those in discretionary trusts don’t apply. If the deceased owned multiple homes, personal representatives are able to nominate which property should qualify for RNRB.

It’s also important not to fall into ‘the sibling trap’ – leaving a home to a sibling rather than a direct descendant such as a son or daughter, which disqualifies them from being able to use the RNRB.


what financial wellbeing means for your health

The latest Financial Wellness Index has revealed that people with very little savings and those who are struggling to pay their bills are also those who are suffering from poor health. Conversely, those enjoying good health are more likely to experience a higher level of financial wellness. The findings raise the question of whether working to improve your financial situation could have a positive impact on your health, or indeed whether a healthier lifestyle might also lead to healthier finances.

The Financial Wellness Index from Momentum UK is put together by the Personal Finance Research Centre at the University of Bristol. It examines a number of fundamental elements of subjects’ financial lives, as well as the macroeconomic state of the UK, to generate the country’s overall Financial Wellness score out of 100.

The latest report has revealed that 17% of people who consider their health as being ‘poor’ have also missed at least one bill payment over the course of the last year, considerably more than the 5% of those who class their health as being ‘excellent’. Similarly, only 5% of those who have a healthy diet have missed a bill payment, compared to 11% of those who eat unhealthily.

The trend can also be seen in the amount of savings held by healthy and unhealthy people. 15% of people in poor health have no savings, compared to just 8% of those in excellent health. There are also considerably more unhealthy (29%) than healthy people (19%) with less than £100 put away. This in turn has an impact on standard of living, with 42% of people in poor health having to reduce their lifestyle expenses such as socialising and holidays, compared to just 23% of people in excellent health.

“The link between financial and physical health is strong in this year’s index, which is not wholly surprising when you start to analyse the similarities in behaviour needed to achieve both”, says Momentum UK’s managing director Samantha Seaton. “Whether you’re improving your fitness or trying to improve your financial picture, success will be found by taking small steps to achieving your longer-term goals”.


which is best? save or invest

Whilst you might expect an increase in the cash and investment ISA limit to be welcomed, at least one dissenting voice has come from Steve Webb, former Pensions Minister and current policy director at Royal London. Webb has warned that the rise in April from the current annual limit of £15,240 up to £20,000 could encourage poor long-term investment choices.

The criticism is aimed at the cash element in particular. Webb has described cash ISAs as useful as a ‘rainy day fund’ but unsuitable as a way to help invested money grow. As such, he’s advised that a more appropriate investment limit for cash ISAs would be £5,000, just a quarter of the proposed new limit.

A report from Royal London backs up this view. Whilst cash ISAs continue to grow in popularity, the returns they offer often pale in comparison to many investment opportunities. Had all the money put into cash ISAs over the past decade been invested instead, the report estimates that savers would now collectively have £360 billion, significantly more than the actual figure of £250 billion. Inflation has also taken its toll on the value offered, with £26 billion worth of savings wiped out in the same period, thanks to cash ISAs failing to keep pace with inflation rates.

Most of us manage our finances in numbers a lot smaller than billions, however, so what does all of this mean? The latest figures show that £1,000 paid into a cash ISA a decade ago would be worth under £900 in today’s money. In contrast, had that money been invested in a typical multi-asset fund where money is spread across property, bonds and shares, it would be worth over £1,500 today.

Whilst this suggests that those looking to grow their money should opt for investments, it doesn’t take into account the safety of cash in the short term and the convenience of having money readily available in an ISA. The most important factor in making decisions around your finances is to think proactively.

Think about your individual circumstances before you opt to tie your money up in an investment but, equally, don’t simply place it all in a cash ISA if you can afford not to touch your savings and allow them to grow. 


4 saving habits of millionaires

There are no shortcuts or guarantees when it comes to achieving self-made millionaire status. That said, it can’t hurt to look at the financial habits of those who have managed to do just that to try and boost your own coffers. Here are our top tips from looking at those who’ve become millionaires by age 30. Who knows, they might just lead to you being worth seven figures in the future.

  1. Don’t rely on your savings – The current economic environment makes it very difficult to become wealthy through saving, so increasing your income is an obvious but good way to boost your bank balance. Whilst increasing your main salary can also be a challenge, you might think about other ways to achieve this such as earning passive income through property rental, or taking on freelance or consultancy work on the side (just keep an eye on any tax repercussions).
  2. Invest, invest, invest – Instead of saving for a rainy day, put your savings into investments. If you choose investments and accounts with restricted access to your funds, not only will this ensure your investments pay off, but it will also help you to focus on increasing your income rather than relying on money you’ve put away.
  3. Change your mindset – Nobody has ever become a millionaire without believing that it’s something they themselves can both achieve and control. The best way to do this is to invest in yourself. Spending time educating yourself about both your business area and the financial world in general will help you to understand how to capitalise on opportunities and genuinely believe you can increase your net worth.
  4. Make plans and set goals – You’ll only boost your wealth if you actually plan out how you’re going to do it. Before you can make a plan, however, you need to decide what you’re aiming for. If you really do want to become a millionaire, then think big: if you have a certain figure you want to achieve, aiming higher will help ensure you reach it or even surpass it.





An ISA millionaire shows the real power of tax free saving

Lord Lee, hailed as Britain’s first ISA millionaire, tells a compelling tale about how a sensible approach to investment, which includes the prevalent use of the tax free accounts, can pay huge dividends.

Writing in The Telegraph, Lord Lee describes how, after 16 years of investing a total of £126,000 into ISAs, his pot had grown to a hugely impressive £1 million.

Of course, not everyone who invests in ISAs will reach the level of return achieved by Lord Lee, but as we approach the April deadline for using your 2013/2014 annual ISA allowance, his examples proves a potent reminder of just how valuable ISAs can be to your investment portfolio.

Using mainly Stocks and Shares ISAs, Lee preaches patience to ISA investors and revealed that his own biggest investing flaw was a lack of it. Certainly Lee now seems to have little reason to worry, but with one holding sold early for between £4.88 and £11 now worth north of £20, the investor still clearly has some regrets.

For any investors who are not currently following Lord Lee’s example, April 5th is a key date. The end of the current tax year marks your last chance to invest up to the government imposed maximum ISA limit. This year the limit has been set at £11,520, with no more than £5,760 able to be held in a Cash ISA.

Lee ends his article by hailing British business and by saying that we, as a nation, should be encouraging responsible savings and investments. Certainly, using your ISA allowance is one very sensible way of starting to do just that.

Sources: http://www.telegraph.co.uk

building your financial future

Understanding your Capital Gains Tax position if you separate or divorce

Whilst your Capital Gains Tax liability might be relatively simple whilst living with your spouse or partner, there are changes that come into play if you separate or divorce.

The position is firstly defined by the new state of your relationship. If the marriage or civil partnership has not broken down but the two partners do not live in the same house, you are still treated as living together for Capital Gains Tax purposes.

In fact, you and your spouse or civil partner are treated as living together unless:

  • you are separated under a court order, or
  • you are separated by a formal Deed of Separation executed under seal
  • you are separated in such circumstances that the separation is likely to be permanent.

As well as this, if you or your spouse or civil partner were living together at some time in a tax year, you can transfer assets between you at any time in that tax year at no gain or loss, with no requirement that you should be living together at the time of transfer. If a transfer occurs between you and your spouse or civil partner after the end of the tax year in which you stop living together, there are rules to decide the date of disposal and the amount of consideration on disposal. HMRC acknowledges that the rules are complex, so analysing them closely in the company of an adviser may well be appropriate.

An example of the complexity can be found by looking at Private Residence Relief (PRR), which you may be entitled to during this period. PRR applies to any gain arising on the disposal of the only or main residence you had while living together. While you and your spouse or civil partner cannot have more than one main residence between you for the purposes of the relief at any time while you are living together, following separation, the residence which is your only or main residence for the purposes of the relief need not be the same as that which is your spouse’s or civil partner’s only or main residence for such purposes. The actual circumstances determine the PRR outcomes for both persons, within a complex set of rules applied over time by HMRC, who also advise those involved to seek professional advice.

Sources: www.hmrc.gov.uk


building your financial future

Transfer of Child Trust Fund savings into Junior ISAs

Since Child Trust Funds (CTFs) were phased out in 2011, parents and the savings industry have lobbied the government to allow the money held in them to be transferred into the Junior ISAs that superseded them. The ISA market is seen as having far more choice and, where the money is held in a savings account, often offers better rates.

The dissatisfaction surrounding the current process stems from the fact that more than six million children with CTFs have been unable to access these apparently better products, under the current rules.

As announced by the Chancellor in the 2013 Budget, steps are now being taken to assess the situation further. The Treasury is currently involved in a consultation on allowing the transfer of savings from a CTF to a Junior ISA.

The purpose is to assess whether transfers should be allowed and then to settle on the proposed approach. When the consultation closes, the government will consider all responses and collate them into a published document.

To the delight of the savings industry and the parents who lobbied for the change, the government has recommended as part of the consultation that the current rules be relaxed so that parents can now opt to transfer their portion of the total £4.8bn now held in CTFs, to Junior ISAs.

The Treasury anticipates that many parents might still choose to keep the CTF rather than transferring it, meaning it would be necessary for providers to continue to offer competitive and alternative products to them.

CTFs were a Labour government initiative to promote saving and were available to children born between 1 September 2002 and 2 January 2011, with the government initially providing a starting voucher of £250. That was reduced to £50 as the accounts were phased out for new savers, before being replaced with Junior ISAs.

The Treasury appears to be seeking to support parents by ensuring that there are clear and simple ways to save for all children, stating within the consultation launch that at the present time the two tier system is unsatisfactory for those who have CTFs but want the wider choice of a Junior ISA.

The consultation runs until 6th August 2013 and HM Treasury is particularly interested to hear from: representative groups for children or savers and CTF holders, their parents or guardians.

Sources: www.hm-treasury.gov.uk


building your financial future

We have done it ! ‘British Standard’ BS 8577:2012

I am delighted to announce that Concept Financial planning has successful been awarded BS 8577:2012 – Framework for the provision of financial advice and planning services by Standards International.  We are the 3rd financial planning firm to receive this prestigious award in the UK.

The service that Concept Financial Planning provides to our clients is of upmost importance and in order to benchmark our service and internal processes against the British Standard of best practice the business entered into a rigorous process of assessment.

The BS 8577:2012 is a new British Standard that assesses and awards financial planning firms who can demonstrate that they have the operational framework to deliver a first class service.

This combined with our International Standard of the ISO 22222:2005, to which we have retained for 3 years in 2012, shows our commitment to excellence when it comes to financial planning.

We believe this shows the processes we use together with our technical ability and coupled with the highest level of client service to deliver outstanding financial planning to our clients.

It does not stop here, our clients needs are at the heart of our business and this is why we are committed to a process of ongoing assessment which ensures that our processes and services are continually assessed by an independent certification body on an annual basis.

As always, should you have any questions, please do not hesitate to contact us on 01737 225665 or advice@conceptfp.com


Junior ISAs

The Coalition Government has now confirmed details of the long awaited savings plan analysts had been expecting since the withdrawal of Child Trust Funds (CTF) last year. The Junior ISA will be launched in November and will extend to under 18s the same tax benefits which parents (and all adults) already enjoy.

The Junior ISA will allow parents to open up a specific account in their child’s name, into which they, their family and friends can contribute a total of up to £3,600 a year. These contributions will then be invested in a chosen mixture of cash and/or stocks and shares and the benefits locked up until that child reaches 18. Anyone under 18 born before September 2002 or after January 2011 (ie: those who do not have a CTF) will be eligible for a Junior ISA (and for those with CTFs, the annual limits are expected to be brought in line).

The Junior ISA could provide a significant step up for children whose family and friends get together for their benefit. Final values will always be subject to the funds you choose and the environment, both of which can have an impact on how much – or little – the invesment returns. However, as an idea of what 18 years of saving might offer, assuming an average of 5% pa (net of charges), that £3,600 pa could leave the lucky beneficiaries with a contribution of over £100,000 towards their world trip, first house or hotly debated tuition fees