Image Courtesy of Flickr_Ishan Manjrekar

Markets tumble as Trump announces sweeping tariffs on China

Please find below latest market video update from our Partners at Russell Investments.

In this issue:

  • White House announcement on Chinese tariffs sparks slide in global indexes
  • Is the Fed sounding a more hawkish tone?
  • What the latest PMI data suggests about the state of the global economy




Image courtesy of Flickr_Pink Sherbert Photography

Cyber Security: What is malware?

There are over 100 million different viruses live on the Internet. Many of these are only slight variants of each, substantially enough different to try and avoid detection by anti-malware software.
Malware is short for ‘malicious software’ and is software designed with a malicious intent. In total it is estimated there are nearly 100 million different types of malware on the web today and growing rapidly.

Due to the potential for high returns, organised crime is investing heavily in malware production and a malware-based cyber attack is the most common threat smaller businesses will experience at least once in the next 12 months.

The UK Government’s Cyber Essentials scheme provides an excellent broader risk management framework for this threat.

Malicious content can be used:
• To record every keystroke on your keyboard, including bank details and passwords
• To make your computer undertake an action on behalf of the malware’s creator
• To encrypt the files on your computer and demand a ransom fee to get your files back

Malicious software, like all software, is ultimately written by a human being. The author of the software identifies a “vulnerability” in an operating system (e.g. Microsoft Windows) or other common software (e.g. Microsoft Word) and “exploits” the vulnerability.

Opportunities and organised crime are typically after either money or information that can be exchanged for money.

Nationstates are most typically after information, for example trade secrets or information on the activity of corporate firms or other Governments.

A simple metaphor is an open window on a house. Malware is written to detect if a certain window is open, and if so, it climbs through and begins to undertake its primary objective. This is why software updates are so important!

Some vulnerabilities aren’t found until it is too late. By this we mean that a malicious individual has found a vulnerability before the software developer, and begins to exploit the vulnerability before a ‘patch’ (software update) is released. These are often called “zero day” attacks, where are “zero days” to be able to respond – the problem is already underway.

Malicious software can’t spontaneously appear on a computer. Typically it requires action by the computer user, either by downloading a file from the Internet or via an infect USB drive.

Most malware is spread via the Internet, either as an attachment to an email, or as a download from a website. The first line of defence for all businesses is their staff not downloading or opening a suspect file.

Interestingly, a recent report identified that religious websites are a greater risk for malware than adult websites. The report stated that, firstly religious websites are often poorly secured, and secondly, that the users of such websites are more likely to trust the website due to its subject matter. Adult websites on the other hand are, mostly, legitimate businesses, meaning that security can be of more importance to the firm on behalf of their customer.

It is for the reasons above that a variety of steps need to be taken by a business to reduce the risk of a malware infection. These include:
• Anti-malware software installed, properly configured and up-to-date
• Annual staff awareness training with a focus on malware
• Configuring computers to require user prompts before software can run
• Ensuring computer users are not working on administrator accounts

With staff awareness training lacking, anti-malware software is often our single greatest hope to defend against this risk.

But… if the anti-malware software isn’t installed correctly it can’t do its job. This requires a business to firstly verify the software is installed correctly from day one, and secondly that they verify at regular intervals that the software remains up-to-date and properly configured.

The way that most anti-malware software works is through “signature” recognition. The creator of the anti-malware software finds a new virus in the wild and, metaphorically, ‘takes a photo’ of it. This photo is called a ‘signature’. The anti-malware software developers then push this signature to its software. If your computer sees the signature, it rejects the file, as it knows it is a bad file.

Unfortunately, malware creators known this, too. It means they have to keep creating variations of their software, with different signatures. The more new signatures, the harder it is for the anti-malware software developers to keep up, and the more chance it is that the malware will infect your computer.

It is for this reason that defending a business against malware must be taken seriously, and that a business should not simply rely on anti-malware software alone.

Unfortunately, the only true defence against malware is constant human diligence. If the malware doesn’t reach your computer, it’s unlikely to be able to infect you.

Source: Berea Group.

Image courtesy of Flickr_Sheila Sund

Health and Safety Executive Prosecutions

Recent Health and Safety Executive news and prosecutions:

£1m fine for Crossrail contractors following three incidents

Three separate incidents occurred during construction on the Crossrail tunnel, the last of which resulted in a worker’s death. As a result, Bam Ferrovial Kier (BFK), an unincorporated joint venture made up of three companies, was fined £1,065,000 and ordered to pay costs of £42,337.28. In its investigation, the HSE found that BFK had neither organised nor enforced a safe system of work. In addition, investigators discovered that equipment and vehicles were not being properly maintained, which also contributed to the incidents.

Companies fined more than £1m after workers exposed to asbestos

While refurbishing a school, workers were exposed to asbestos. The three companies working on the project were fined more than £1m. In its investigation, the HSE found that while an asbestos survey had been completed, there were multiple warnings and disclaimers that were not appropriately checked.

Image courtesy of Flickr_Sheila Sund

How millions have themselves at risk by failing to plan for their assets

More than anyone else, parents and grandparents should avoid the pitfalls of not preparing a will.

It’s a shocking statistic, but around 27 million adults in the UK have failed to prepare a will.

This can have serious consequences, especially if you’re a parent. Dying without a will means the law will simply run its course, often against your wishes. It’s a huge risk that can leave you powerless over your assets.

More than anyone else, parents and grandparents should avoid the pitfalls of not preparing a will.

It’s a shocking statistic, but around 27 million adults in the UK have failed to prepare a will.

This can have serious consequences, especially if you’re a parent. Dying without a will means the law will simply run its course, often against your wishes. It’s a huge risk that can leave you powerless over your assets.

Why A Professional Will Is Essential

The technical term for passing away with no valid will is ‘dying intestate’. If this happens your money, possessions and property will be divided up according to the law, and your loved ones could stand to inherit nothing.

For instance, if you are unmarried and die ‘intestate’, your partner would by law receive nothing. If you have children this can complicate things further, as the law often places them above your partner in the pecking order – and if you have children from a previous marriage they could be completely passed by too.

Put simply, dying without a will means you have no control over who stands to inherit your hard-earned assets. Even worse, if you pass away with no close relatives, this could pass automatically to the government, who claim millions of pounds from this every year.

By writing a Will and making sure you review it when your circumstances change, you are safeguarding your loved ones from unnecessary future emotional stress and financial worries in the event of your premature death. Click here to find out more about writing a Will.


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Refresh your New Year Resolutions

It’s that time of year again, so what financial resolutions should you be making?

New Year resolutions have a tendency not to last very long. By the time the festive season finally ends and the decorations are put away, the eat less/drink less/exercise more resolutions have often also disappeared. For 2018, why not adopt a different type of resolution – a financial one? Here are four possibilities:

1. I will review my will

Whatever your December excesses, contemplating your own mortality is not an exercise you should rush into. However, ensuring your will is up to date is one way to make sure your assets are dealt with in the way that you want when you are not around. Although it is sometimes possible to restructure a will after someone has died, all parties to any amendment must agree, which can create its own problems. If – as many people do – you have no will and assume the laws of intestacy will resolve everything, you could be seriously mistaken. Intestacy does not  lways mean everything passes to a surviving spouse or civil partner – and it is especially hazardous if you are in an informal relationship.

2. I will complete a Lasting Power of Attorney

In many respects, no will is complete without a matching pair of Lasting Powers of Attorney (LPAs) or the equivalents in Scotland or Northern Ireland. An LPA allows you to appoint one or more people to make decisions for you if your health – mental and/or physical – prevents you from doing so. There are two LPA variants: one covering your property and financial affairs, and the other deals with your health and welfare. Without LPAs, your family could find themselves having to deal with the Public Guardian, which can be an expensive and impersonal legal process.

3. We will review our ownership of investments

The past few years have seen a steady flow of changes to the personal tax treatment of investment income, such as the introduction of the personal savings allowance and the reform of dividend taxation. It is now more important than ever for couples to review who owns which investment.

For example, next tax year’s cut in the dividend allowance to £2,000 could mean it makes tax sense, where unused allowance is available, to transfer some fund holdings from a basic rate taxpaying spouse to their higher rate tax-paying partner.

4. I will obtain an estimate of my current pension benefits

The recent multitude of changes to pension rules impacted on both the state and private pension provision. They could well have altered your retirement income, how you can draw benefits and even when you will receive some of your pension. If you have been automatically enrolled in your employer’s pension, a review is particularly relevant because of the significant contribution increases due over the next 18 months.

In personal financial planning, as in many other aspects of life, putting things off is seldom wise: delays can all too easily add to cost. The four resolutions listed here are one-offs – they do not require you to keep doing something regularly, which is how the typical 1 January pledge fails. Why not call us now and start 2018 the right way?

The value of tax reliefs depends on your individual circumstances.

Tax laws can change. The Financial Conduct Authority does not regulate tax, will writing, Lasting Powers of Attorney, trust advice and some forms of estate planning.


PK Partnership Professional membership

Investing for children – not just for Christmas

National Savings has closed one option, but there are many more possibilities to consider.

In September, National Savings & Investments (NS&I) withdrew the fixed rate Children’s Bond from sale and launched its first, online only junior ISA (JISA). The new cash JISA is no league table topper, as it currently offers only a 2% variable interest rate compared with 3% available from some High Street names.

Interest rates for cash JISAs are generally higher than those available on adult cash ISAs, so before you decide to contribute to a cash JISA for a child or grandchild (or anyone else under 18), remember:

- Not all children are eligible for JISAs. Children born between1 September 2002 and 2 January 2011 can only have a JISAif they do not already hold a child trust fund (CTF) account. However, this restriction can be overcome easily by transferring a CTF to a JISA.

- It is arguable that locking up an investment in a short-term deposit over the long term until a child reaches age 18 may not be the most sensible option to maximise your capital. With the current inflation rate around 3%, the purchasing power of the cash deposit is doing little more than standing still at best. A stocks and shares ISA could have greater long-term growth potential.

- The maximum total JISA investment in 2017/18 is £4,128 and, to complicate matters further, a child can have only one cash JISA at a time (adult ISAs have different rules).

- At age 18, the JISA funds become immediately available to the new adult.

Non-ISA options

Some families may feel that making a full JISA fund available to an 18-year old is not always advisable. If you’re uncertain about how a young adult might handle their sudden windfall, there are other options. One is to contribute to a personal pension instead of a JISA. The maximum contribution is lower, at £2,880 per tax year, but:

- The contribution benefits from basic rate tax relief, even though the child will almost certainly be a non-taxpayer. So £2,880 therefore becomes £3,600 in their pension plan.

- During the investment period, the tax treatment is virtually the same as for JISAs – no UK income tax or capital gains tax.

Once the adult child draws the benefits, 25% will be available as a tax-free lump sum, with the balance taxable as income under current rules.

- Normally the pension fund cannot be drawn upon until the ‘child’ is within ten years of their state pension age (SPA). As the SPA is steadily rising, that will probably mean access becomes available from around the age of 60.

In between the two age extremes, it is possible to use trusts to make gifts to children while still retaining some control as a trustee over when and how funds can be accessed. If you choose the trust route, there are no constraints on the size or type of investment, but the tax treatment may not be as favourable.

For more information on all the options for children’s investments, do get in touch – this is an area with some tricky tax traps for the unwary.

The value of tax reliefs depends on your individual circumstances.

Tax laws can change. The Financial Conduct Authority does not regulate tax and trust advice. The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long term investment and should fit in with your overall attitude to risk and financial circumstances.


PK Partnership Mortgage

Financial Matters: Winter 2017

In the winter issue of Financial Focus we take a closer look at:

  • Investing for children – not just for Christmas
  • Asset allocation in a world of rising inflation
  • Refresh your New Year resolutions
  • Time to update your life insurance

Please click here to read the full newsletter.

Image Courtesy of Flickr_Ishan Manjrekar

Asset allocation in a world of rising inflation

Prices are rising at their fastest rate for five years. Annual inflation rose to 3% in September, and stayed at this rate in October. This led to the Bank of England increasing interest rates in early  November for the first time in a decade.

Rising prices can be challenging for savers and investors, because it reduces the spending power of your money over time. Inflation running at 3% a year will almost halve the value of your money over 20 years. Even over shorter periods, it can have a marked effect. So how can you help counter the effects of rising inflation and low interest rates in your investment choices?

Boost cash returns

Inflation is bad news for cash savers, particularly as interest rates are so low. Many will welcome further interest rate rises, which should prompt banks and building societies to increase savings rates. But rate rises are likely to be minimal and gradual – with gains likely to be wiped out by still higher inflation. People with cash savings should monitor rates carefully. Be prepared to switch accounts to take advantage of any better deals that appear over the next few months.

Bad news for bonds

Higher interest rates and rising inflation can have a negative impact on fixed-interest investments – such as corporate bonds and gilts. As the name suggests, fixed-interest investments pay a fixed return, which can look less attractive if interest rates rise significantly. This can weaken demand for these investments, lowering the price at which they are traded. Higher inflation can also reduce the value of fixed income over time, further reducing demand for these investments.

All this doesn’t mean you should avoid bonds completely; they offer reliable income streams and are a valuable part of a diversified portfolio. But be aware that market conditions could cause valuations to slip in the near future.

Stick with the stock market

Shares can be a good hedge against inflation, because companies have the potential to grow their profits broadly in line with inflation. However, share prices can be volatile, particularly over shorter timeframes.  Where possible, investors should diversify and hold a range of shares in different markets. In periods of higher inflation, investors tend to favour secure companies with consistent earnings that pay reliable dividends. These types of company shares are often found in equity income funds. Higher inflation can impact returns on some equities. For example, retailers can find that their margins come under pressure if the prices of wholesale goods rise. Certain sectors, however, can benefit from higher inflation – for example, utility companies.

Consumers still need water and electricity, and some companies are able to link their prices to inflation.

Meanwhile, higher interest rates are good news for banks and other financial companies, but they are generally bad news for companies with high levels of debt, such as most house-builders, because higher interest rates increase their costs.

Investors should be wary about making too many changes based on predictions or short-term market movements. Concentrate on longer-term goals, and assume inflation will be a factor over time. For most investors, the best way to beat inflation is to build a diversified portfolio that includes equities for growth as well as more secure assets, like bonds, to provide diversification and help manage risks. If you’d like to review your investments, please let us know.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

Image courtesy of Flickr_Pink Sherbert Photography

Steady ahead – the second Budget of 2017

The Chancellor detailed a long list of tax changes in his Autumn Budget, although he was generally more cautious than he was in his Spring announcements.

Back in March this year, Philip Hammond’s Budget debut as Chancellor almost marked his simultaneous finale in the role because of his failed attempt to raise national insurance contributions for the self-employed. This time around seems to have gone more favourably.

Stamp duty land tax (SDLT) and fi rst-time buyers For first time buyers (other than in Scotland), from 22 November the first £300,000 slice of their property’s purchase price is exempt from SDLT, provided their home does not cost more than £500,000. That could mean a tax saving of up to £5,000.

Income Tax The personal allowance will rise to £11,850 and the higher rate tax threshold (excluding that for non-savings, non dividend income in Scotland) will rise to £46,350 for 2018/19.

The missing Scottish threshold awaits fi nalisation of the Scottish Budget. Both increases are in line with annual infl ation to last September. The government’s stated aim is to raise the personal allowance to £12,500 and the higher rate threshold to £50,000 by 2020/21.

Pensions Despite many pre-Budget rumours about cuts to allowances and even the rate of tax relief, the Chancellor made no changes to reduce pension tax benefi ts. Doing nothing meant that the lifetime allowance will rise by default to £1,030,000 from 6 April 2018. Remember, however, that Mr Hammond’s spring Budget cut the money purchase annual allowance to £4,000 from 6 April 2017.

Diesel company cars The scale charge surcharge on diesel company cars is currently 3% and will increase to 4% for cars that do not meet the latest emission standards, known as RDE2. Even HMRC recognises that “it is likely that few, if any, cars will meet RDE2 standards in 2018/2019”. The extra 1% will come on top of another 2% addition to most scale charges next tax year.

Venture capital schemes The Chancellor targeted venture capital trusts (VCTs), enterprise investment schemes (EISs) and seed enterprise investment schemes (SEISs), which have all gained popularity as pension allowances have been reduced. His measures were designed to focus the schemes on growth investment “where there is a real risk to the capital being invested” and exclude arrangements aiming at “capital preservation”.

ISAs The overall ISA annual subscription limit of £20,000 and the lifetime ISA (LISA) of £4,000 will be unchanged for 2018/19.

The Chancellor may have decided that the forthcoming cut in the dividend allowance from £5,000 to £2,000 was enough of an incentive to invest in ISAs. The junior ISA (JISA) limit, which also applies to child trust funds (CTFs), will rise in line with inflation to £4,260. Capital gains tax The annual exemption will increase to £11,700 for 2018/19 – worth a tax saving of up to £3,276 to a higher rate taxpayer on property-related gains. Buy-to-let investors who use companies to hold their properties were less lucky as, from January 2018, the indexation allowance on corporate capital gains will be frozen. The freeze will result in an increased amount of any future gain becoming subject to corporation tax. The change will also affect UK life companies and could reduce future returns on UK endowment and single premium policies.

If you have any questions about the financial planning implications, please talk to us as soon as possible.

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice. The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fi t in with your overall attitude to risk and financial circumstances.

PK Partnership cost of financial advice

Auto-enrolment moves to the next stage in April: are you ready?

Automatic enrolment of employees into workplace pensions has been much more of a success story than predicted. In the last three years, over 8.5 million people have begun saving for their retirement and almost 800,000 employers have successfully complied with their automatic enrolment duties, according to The Pensions Regulator.

A key factor that helped the initial acceptance of auto-enrolment was the low level of employee contributions. Now the regime is moving on to the next, more challenging stage. From 6 April 2018 there will be a big jump in minimum contributions for both employers and employees.

At present, the total minimum contribution required is just 2% of band earnings (earnings between £5,876 and £45,000 a year in 2017/18). Of this, the employer must pay at least 1%. So the typical minimum 1% contribution by an employee earning £25,000 a year currently works out at £12.75 a month after basic rate tax relief.

Contribution levels rising

From next April, however, the minimum total contribution will rise to 5%, and the employer must pay at least 2% of this total. Most automatically enrolled employees will see their contribution rate triple – from 1% to 3%. A year later, in April 2019, there will another 3% increase in the minimum total, leaving the employer with a payment of 3% and most employees facing a further increase in contributions to 5%. Based on this year’s rates (which may change), that £12.75 a month in March 2017 will have increased to £63.75 a month by May 2019.

The choice of April for the increase date was deliberate because it coincides with the likely revisions to the personal allowance and national insurance contributions at the start of the new tax year. Both of these generally boost employees’ net pay and so hide some of the increased deduction from earnings.

If you are an employer, you would be well advised to alert your employees to their contribution increase before it takes effect. You should also ensure you have budgeted for your contribution increases in 2018/19 and then again in 2019/20.

For further advice and information, please talk to us – well before April 2018 arrives.

Occupational pension schemes are regulated by The Pensions Regulator. The Financial Conduct Authority does not regulate tax advice, and tax laws may change.



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