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How mooted pension tax relief reform plans could hit savers

Please see below article recently received from AJ Bell, which warns of the potential impact that tax relief reform could have on pensions and investors.

Recent press reports suggest the Treasury is eyeing cuts to pension tax incentives to help pay the cost of COVID. Reforms said to be under consideration include introducing a flat rate of pension tax relief, cutting the lifetime allowance or taxing employer contributions.

Beyond the political fire and brimstone a pensions tax raid would cause among Conservative backbenchers and voters, there would be significant practical implications for any of the proposals floated by the Treasury.

Cutting tax relief for individuals risks undoing the groundwork laid by automatic enrolment and sowing mistrust in the stability of the retirement savings framework.

Hitting employers, meanwhile, might raise a fast buck for the Chancellor but would risk strangling off the UK’s pandemic recovery.

There were always going to be tough fiscal choices as the country slowly shifts away from dealing with the health emergency of Coronavirus and focuses on the financial hole blown in the Exchequer’s balance sheet.

It is critical any proposals for pension tax reform consider both short and long-term priorities, and in particular the challenge of ensuring current and future generations’ retirement prospects are not fatally damaged.

Introducing a flat rate of pension tax relief

Given the priority of the Government is to raise cash for the post-COVID economic recovery, a flat rate of pension tax relief would likely need to be set well below 30% to achieve this.

In fact, analysis carried out by the respected Pensions Policy Institute* suggested setting a flat rate of pension tax relief at 30% would actually cost the Government money, while a rate of 25% might save between £2-£3billion a year and 20% around £6-£8 billion a year.

Such huge savings would clearly come at a cost to individuals. For example, if a flat rate of 20% was introduced, a 35-year-old earning £60,000 and paying 4% of salary into a pension could miss out on £50,000 of retirement income by the time they are 67. Those earning more or making larger contributions would face an even bigger hit to their plans.

However, the big challenge in going down this road – both practically and politically – lies in the public sector, where some workers continue to enjoy generous guaranteed defined benefit pensions.

In order to apply a flat rate of relief to these pensions a tax charge would need to be calculated and applied directly to employees by HMRC.

Doctors and senior NHS staff who have been on the front line dealing with the pandemic would likely end up with tax bills running into thousands of pounds as a result.

Reduce the pensions lifetime allowance from £1,073,100 to £900,000 or £800,000

The lifetime allowance has been tinkered with relentlessly by successive Governments, reducing from £1.8 million a decade ago to just £1 million by 2016/17. Two years later it was pegged to CPI inflation – but this link was removed for the rest of this Parliament by Rishi Sunak in March. This constant tinkering has led to huge complexity and uncertainty for retirement savers.

If we were to get yet another cut to the lifetime allowance to £900,000 or even £800,000, as has been suggested, more diligent savers would be at risk of breaching the limit.

To put this in context, reducing the lifetime allowance to £800,000 would mean after tax-free cash has been taken the retirement income someone could take at age 66 would be well below the average salary in the UK.**

This would feel like an extremely low bar to set for people’s retirement aspirations.

Tax employer pension contributions

Of the pension tax proposals floated this was the one with the least amount of detail attached – which is saying something.

At the moment employer pension contributions are exempt from National Insurance, so it is theoretically possible the Treasury could reverse this position – or perhaps apply a limited charge – in a bid to raise revenue.

However, going down this road would cause uproar among businesses already struggling to deal with the fallout from the pandemic. It could also be counterproductive if landing these firms with extra costs forced them to hold off on investment.

Over the long-term, any increase in the costs of providing pensions would likely see a damaging levelling down of provision.


Pension tax reliefs have been under review since Gordon Brown was the Chancellor in 1997, remember his tax raid?  Every government looks at them.

Whilst changing tax reliefs could save money for the State, we need to look at the bigger picture.  What would be the impact on pension savings?  If people save less in pensions, they will rely more on the State.  This is not what any government wants.

I think tinkering with employer pension contributions tax relief would be particularly damaging.  Employers need to help fund employee’s pensions.

Hopefully, we won’t see any change in this area, but we also know that we need money now too to support the country in key areas, covid debt interest payments (long term repayment?), to re-build the NHS/Social Services/Residential Care etc., and to help kick start the economy in the UK.

The other issue is timing, Rishi Sunak needs all of us to go out and spend money now to help the economy recover.  He can’t scare us into not spending, we will fall back into recession.

Steve Speed


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Sustainable fashion: Why it matters, and how to identify the winners

Please see the below article from JP Morgan received yesterday, 26/04/2021:

The concept of sustainability is rapidly rising up the agenda within the fashion industry. Yet while consumers are increasingly interested in sustainable fashion, they are not willing to pay a premium for it. Still, sustainability can be a competitive advantage. We have seen companies delivering a sustainable message, but identifying the true leaders from the potential greenwashing takes research.

Consumers care about sustainabilty, but not at any price

As the global population grows, the negative environmental impacts of our demand for fashion are becoming more apparent. The industry is responsible for 10% of global carbon emissions and 20% of global wastewater, as well as producing significant amounts of waste. The equivalent of one garbage truck of textiles is dumped in landfill or burned every second.

75% of consumers view sustainability as ‘extremely’ or ‘very important’ in their fashion purchasing decision. And over 50% of consumers would switch for a brand that acts in a more environmentally and socially friendly way. But in practice, are consumers really willing to pay? Not yet, it seems. Only 7% of consumers say sustainability is the most important factor in their decision making.

Exhibit 1: Consumers care about sustainabilty, but not at any price – most important factors in decision making

Consumers continue to rate ‘high quality’ and ‘good value for money’ as the most important factors in their decisions. This is backed up by our engagements with fashion companies, who claim that consumers are not willing to pay a premium for sustainability, although at the same price point they would choose the more sustainable offering.

To us, this signals that consumers have a preference for sustainability and it can be a competitive advantage for retailers. But companies need to see it as a way to maintain or grow their market share rather than a way to increase prices. Sustainable leaders should be investing in innovation and scale for sustainable solutions to bring prices down and maintain their brand position.

Case study 1

Re:NewCell: Driving down costs for sustainability in fashion

Re:NewCell is a Swedish company driving down the costs of sustainable materials through innovation. The company has developed and patented Circulose, a high quality material made from recycled clothes. We expect Circulose – which has already been adopted by the likes of H&M and Levi’s – to see increasing uptake within the fashion industry, helping to lower the cost of sustainable materials and improve the industry’s environmental footprint.

Case study 2

Adidas: Leading the charge on sustainability

Adidas, the well-known sportswear brand, is at the forefront of sustainability within the fashion industry. The company particularly stands out on circularity, which is embedded in its strategic priorities: by 2024, Adidas has committed to replace virgin polyester with recycled polyester. The company already partners with the environmental organisation Parley for the Oceans to use recycled polyester made out of plastic collected from the coastline. All of Adidas’s cotton is sustainably sourced via the Better Cotton Initiative, earning Adidas the top spot in a 2020 independent ranking on sustainable cotton sourcing. Adidas has committed to reducing greenhouse emissions across its entire value chain by 30% between 2017 and 2030, and then achieving climate neutrality by 2050. As a further validation of Adidas’s sustainability efforts, these goals were submitted for external verification by the Science Based Target initiative in February 2020.

Sources: Adidas and the Sustainable Cotton Ranking 2020 (77 companies).

The companies above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell.

Distinguishing the real from the fake

The fashion industry is highly fragmented, and sustainability standards are still in their infancy. More and more companies are reporting on both their environmental and social impacts. But with different companies focusing on different disclosures, metrics and measurement methodologies, how can we identify the best? For us, fundamental research and company engagement are key, allowing us to assess whether fashion brands are paying lip service to sustainability or whether they are truly committed to it.

What do we look for in a sustainable fashion leader? 

  • Has the company signed up to measurable targets to reduce its negative environmental footprint?
  • Is the company abiding by external certifications to demonstrate the sustainability of its products?
  • Is the company accurately measuring and reporting its entire carbon footprint?

The last of these requires particular research focus as only about 5% of a fashion retailer’s carbon footprint comes directly from its own operations (scope 1 emissions) or indirectly from generating the energy used by the company (scope 2). The vast majority of carbon emissions occur in the company’s value chain (scope 3). This includes production, processing and transportation of fibres and fabrics, transportation of the end product to its final destination, and emissions related to use, care and disposal. Unsurprisingly, this complexity means that emissions are currently underreported, with many companies only reporting on transportation of the end product. Fundamental research is therefore key to understand the supply chain picture and determine what companies are really doing to reduce their total emissions.


While price sensitivity remains key for consumers in the fashion industry, evidence points to sustainability becoming more important in purchasing decisions and ultimately to long-term brand value. This implies a material opportunity for sustainable leaders to stand out while unsustainable fashion brands lose out. Yet the potential for greenwashing is rife in the industry, making it difficult to distinguish between leaders and laggards in the transition to sustainable fashion. Company research and engagement is key.

Our Comments

This is another example of sustainability and ESG themes filtering down to everyday life.

The fashion industry, particularly the problematic ‘fast fashion’ companies seem to hit the headlines on a regular basis for all sorts of issues, from waste to poor working conditions so the sustainability of the fashion industry is starting to be questioned more often.

With fund managers now also becoming increasingly more concerned with ESG and sustainability issues, the fashion industry will have to also adapt to these changes in the way consumers and investors are thinking and what it is they are looking for when investing or purchasing their products.

Shopping for items such as clothes became pretty much an online only occurrence for a large proportion of the past 13 months, I have myself noticed that sustainability is being used a selling point, whether it be statements on the companies website or even noted in the products description. Some companies plant a tree for every item of clothing purchased.

As this article highlights, a lot of people would consider switching to more environmentally and socially friendly brands, but they may not be willing to pay an extra premium for it. Personally, I don’t think it will be long until paying extra won’t be an issue, as the world changes and now has ESG principles under a microscope, these companies will have to adapt to remain competitive in the marketplace.

From a personal experience perspective, I recently purchased an item of clothing having no idea it was part of a ‘sustainable’ line until I was checking the label for the washing instructions only to find out that the item was made out of 100% recycled plastic bottles and textile waste that had been processed and melted down into new fibres in an effort to save water, energy and reduce greenhouses gases.

The item was no more expensive than a ‘non sustainable’ item and the quality was probably better than products that use ‘virgin’ or non-recycled materials.

As consumers, if you don’t have to compromise on cost or quality, then why wouldn’t you choose more sustainable options?

Andrew Lloyd


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Will ‘peak pension freedoms season’ return after pandemic-induced withdrawals slump in 2020?

This email was received yesterday, 11/04/2021, and this article was written by Tom Selby, a Senior Analyst at A. J. Bell.

Until 2020, the beginning of a new tax year has traditionally been peak pension withdrawal season, with UK savers taking advantage of a fresh set of tax allowances to access larger amounts from their retirement pots.

In fact, before the pandemic hit withdrawals in the first three months of the financial year had been between 10% and 33% higher than in subsequent quarters.

That all changed last year, when retirement income investors spooked by the uncertainty of lockdown – not to mention double-digit market falls – tightened their belts, with year-on-year withdrawals dropping 17%.

This likely reflected people choosing to either delay accessing their pension, pause withdrawals or reduce the amount they were taking as income in the face of profound uncertainty.

While most of us still have fewer things to spend our money on at the moment – particularly given restrictions on foreign travel – the success of the coronavirus vaccine and more stable market conditions mean we should expect to see a significant jump in withdrawals in the coming quarter.

For those accessing their retirement pot during this period, there are various pitfalls and bear traps to watch out for.

Source: HMRC

1. Taking taxable income flexibly from your pension will trigger an irreversible £36,000 cut in your annual allowance

Anyone considering taking taxable income from their retirement pot for the first time needs to be aware of the severe impact it will have on their ability to save tax efficiently in a pension in the future.

Taking even £1 of taxable income will trigger the money purchase annual allowance (MPAA), reducing the amount most people can save in a pension each year from £40,000 to just £4,000.

Furthermore, if you trigger the MPAA you will lose the ability to ‘carry forward’ unused pensions allowances from up to 3 previous tax years, meaning in some cases the impact will be a £156,000 reduction in the potential annual allowance in the current tax year, from £160,000 to £4,000.

To avoid an annual allowance cut, savers who have the option should consider using money held in vehicles such as ISAs or cash savings accounts first. For those who only have their pension, just taking your 25% tax-free cash will also allow you to retain the £40,000 annual allowance.

2. Your first taxable withdrawal will be subject to emergency ‘Month 1’ taxation

Since the pension freedoms launched in April 2015, around £700 million has been repaid to savers who were overtaxed on taxable withdrawals.

When you first take a flexible payment from your pension, HMRC will automatically tax it on an emergency ‘Month 1’ basis. This means that the usual tax allowances are divided by 12 and then applied to that first withdrawal.

For example, if someone made a £12,500 taxable withdrawal in 2020/21 and had no other taxable income, they might expect to be charged 0% income tax as the withdrawal is within their personal allowance.

However, because it is their first taxable withdrawal only £1,042 (£12,500 personal allowance divided by 12) is taxed at 0%. The next £3,125 (£37,500 basic-rate tax band divided by 12) is taxed at 20%, with the remaining £8,333 taxed at 40%.

In total, rather than paying zero tax they would face an initial – potentially shocking – bill of £3,958.

For those taking a regular income this shouldn’t be a problem, as any overpaid tax in the first month will be ironed out via your tax code. However, where it is a single payment over the tax year there are two options – wait until the end of the tax year for HMRC to hopefully sort it out, or sort it out yourself by filling out one of three forms.

Once you’ve filled out and sent off the relevant form, HMRC says you should receive a refund of your overpaid tax within 30 days.

View the tax refund form

  • If the withdrawal used up your entire pension pot and you have no other income in the tax year, use form P50Z;
  • If the withdrawal used up your entire pension pot and you have other taxable income, use form P53Z;
  • If the withdrawal didn’t use up your pension pot and you’re not taking regular payments, use form P55.

3. Think about the sustainability of your retirement plan – and beware big withdrawals during falling markets

Last year saw the first bear market – characterised by falls in stocks of more than 20% – since the pension freedoms launched in 2015. The pandemic and global economic shutdown brought into sharp focus the importance of understanding the investment risks you are taking and managing withdrawals sustainably.

This is particularly the case where large withdrawals come at the same time as big falls in markets, a phenomenon often referred to as ‘pound-cost ravaging’.

As an example, someone taking a 5% inflation-adjusted income from their fund who suffered a 20% hit in their first year of drawdown and 4% growth thereafter could see their pot run out after 18 years – three years sooner than if they suffered the hit 10 years into retirement.

To put this into context, whilst on average life expectancy at 65 is 18.6 years for men and 21 years for women, a man has a 1 in 4 chance of living another 27 years, while a woman has a 1 in 4 chance of living another 29 years.

Savers wanting to manage withdrawals sustainably and avoid selling down their capital at a low point in the market could use other cash resources – such as ISAs, savings or their 25% tax-free cash – in order to keep their underlying pension intact.

Taking a natural income has also been a good strategy previously, although finding companies paying the dividends needed has been a real challenge over the past 12 months.

For those who do take capital withdrawals from their pension, the key is to have a plan in place and review your income strategy regularly, ideally with the help of a regulated adviser, to ensure you aren’t risking running out of money early in retirement.

4. If you’re just taking your tax-free cash, don’t forget about the remaining 75% of your fund

The vast majority of savers cite accessing their 25% tax-free cash as the main reason for entering drawdown*. This is understandable given this is one of the main tax benefits of saving in a pension.

Although accessing your tax-free cash won’t necessarily mean a change in your underlying investments, it is worth using this as an opportunity to review your retirement plans and ultimate goals.

For example, someone planning to take a regular income after accessing their tax-free cash will likely have a different asset allocation to someone who doesn’t plan to touch the remaining money for 15 years.

While many will understandably be spooked at the prospect of investing at the moment, it is worth remembering that short-term volatility has historically been the price you pay to enjoy longer-term growth.

Investors also need to be aware of and comfortable with the risks they are taking.

Although investments can go down in value as well as up, the value of cash will be eaten away by inflation over time.

5. Do you want to spend your pension or leave it to loved ones after you die?

Pensions are no longer just about providing an income in retirement. Since 2016, savers have been able to pass on leftover pensions tax-free if they die before age 75.

Where the pension holder dies after age 75, the remaining funds will be taxed at their recipient’s marginal rate when they make a withdrawal.

For those who want to leave assets to loved ones, it therefore often makes sense to leave as much of your pension untouched as possible in order to minimise your tax bill.

This means when you come to flexibly access your pension for the first time, you should think not just of your retirement income strategy but also your IHT plans.

It’s also important to ensure your nominated beneficiaries are up-to-date so the right people inherit your pot.

Useful input from Tom at A. J. Bell.  There is nothing new here, since the new ‘Pension Freedoms’ were introduced in April 2015 we have had the freedom to withdraw capital and/or income from age 55 from our fund value based pension pots with greater flexibility.

However, we have had some form of Pension ‘Drawdown’ legislation in place since 1995.

This is a key area for independent financial advice.  The pitfalls are substantial if you don’t fully understand what you are doing.

In general terms, it’s probably better for the majority of the population not to access their pension funds until they retire or at least semi retire.  There are exceptions to this.

My focus as an IFA is in the following areas:

  1. Overall tax efficiency, holistically and with your partner if applicable
  2. Sustaining your pension assets for potentially a long-term retirement.  We are living longer on average
  3. Retaining your ability to fund pensions at a good level if at all possible
  4. Building your assets for your eventual full retirement, a variety of assets to aid tax efficiency and risk control

Retirement planning is not a ‘one size fits all’ approach.  We need to carefully take into account our client’s circumstances, plans and objectives.

The earlier you start planning for retirement the better.  We can do a lot more with a 15 year term to retirement than we can with a few months.  However, even if you are coming to this ‘Pension Freedom’ late, near drawing benefits, please do take advice.

Steve Speed


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Why it’s a good idea to have an emergency fund

Please see the below article published by Royal London, then our closing comments in blue:

Setting aside money for a rainy day can help tide you over in difficult times and provide some financial security when you need it most.

What is an emergency fund?

This is money you save to pay for the unexpected, whether that’s a bill you hadn’t planned for or a change in your circumstances such as if you lose your job or are unable to work due to illness. This cash is often called rainy day money.

Why you should have an emergency fund

If you have money set aside for emergencies, you’re far less likely to experience financial difficulties or have to borrow at a high interest rate if things go wrong or your circumstances change. Knowing you’ve got some money tucked away might help you sleep better at night too.

Deciding how much you need

This depends on several things such as your circumstances, the sorts of emergencies you might face and how much insurance protection you already have.

For example, someone with a family, mortgage and loans is likely to need a larger emergency fund than a single person with no children who lives in rented accommodation and has no debts. This is because they have more financial responsibilities and dependants to look after. That’s not to say that if you’re single with no dependants you don’t need an emergency fund. Everyone should keep some spare money available – it’s just a question of how much.

If you have insurance to cover certain losses or expenses, this might affect how much you need in your emergency fund. For example, you may have house, car or dental insurance which would cover you for some emergencies and expensive bills. Or you may have insurance which would provide you with an income or pay some of your bills if you lost your job or were unable to work due to illness. In these cases you might only need enough in your emergency fund to tide you over until these payments kicked in.

But the general advice is to have enough money in your emergency fund to cover your expenses for at least three months. So, if your monthly expenses are £2,000 you might want an emergency fund of £6,000. If this seems like a daunting amount to aim for, don’t be put off. Remember that having some savings, however small, is better than having nothing. Why not try setting your own goal to save a set amount by the end of year? Aim for a challenging but achievable amount.

How to build an emergency fund

Saving regularly is a good way to build up an emergency fund. You’ll find that if you get into the habit of saving each month your savings will soon mount up. See our tips below to help you save.

Some people like to have more than one emergency fund. For example, one fund might be to replace income if you’re unable to work and another to cover any unexpected one-off or larger-than-expected bills. There’s no right or wrong way of doing this, just choose the method that suits you best.

Tips to help you save

Make it simple: Set up a monthly transfer so that money is automatically taken from your current account and put into a savings account.

Time it right: Set the transfer so it goes out of your bank account straight after you get paid or get your pension or benefits.

Keep your savings separate: By keeping your savings in a separate account from your everyday spending you’ll be less tempted to spend them.

Check your spending: If you don’t think you can afford to save, try closely monitoring your spending for a month or two. You may find areas you can cut back on. If you haven’t reviewed your bills like your house and car insurance or your energy or mobile phone deal recently, you may be able to free-up money by switching to a cheaper deal.

Save first: If you get a pay rise, think about saving some of it before you get used to having the extra cash.

Where to keep your rainy day money

Regardless of how many emergency funds you choose to have, the money should always be easily accessible such as in an easy access savings account or instant-access cash ISA. Avoid accounts where you have to give a long period of notice to take your money out.

If you are on certain benefits, you will qualify for the government’s Help to Save account which pays a generous tax-free bonus to help boost your savings. You’ll get 50p for each £1 you save over four years, although there are limits on the maximum bonus you can get. For example, you can only save up to £50 a month into the account. To find out if you’re eligible and for details of the bonus, go to

What if I’ve got debts, should I still save?

It depends on what kind of debts you have. If your debts are manageable and low cost, this shouldn’t hold you back from starting a rainy day fund. Having some savings set aside will mean you won’t have to fall back on expensive borrowing if you do have an unexpected expense.

If you’ve got expensive debts such as credit card or overdraft debt, arrears on your mortgage or a payday loan, you might want to think about using any spare money you have to pay off these first. The Money and Pensions Service has some useful guidance on whether to save or pay off debts first.

This is a really good article from Royal London and highlights the importance of a rainy day fund.

Last year was the ultimate rainy day for some people who perhaps lost their jobs, were furloughed or the self employed whose income may have dropped.

Having money set aside in easily accessible accounts is key for emergencies and unforeseen circumstances.

Royal London suggest in this article having at least 3 months expenditure set aside however this should be your starting point, we would recommend aiming to have a years expenditure as your emergency fund, especially in the run up to retirement for example.

Look at what the past year taught us, nobody expected it and nobody was prepared so if you haven’t already got an emergency fund, start building one now, that rainy day could be just around the corner!

Andrew Lloyd


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Normal Pension Age Update re early access to pension benefits

HM Treasury and HMRC quietly launched additional proposals on 11/02/2021 with the potential to have a much greater effect on retirement planning over the coming years.

The proposals

The main proposal is this: anyone who was a member of a registered pension scheme on 11 February 2021 (the date of the consultation) and had a right to take pension benefits before age 57 on that date, would keep that right as a protected pension age. That protected pension age (which in most cases would be 55) would be scheme specific and work similarly to existing protected pension ages. This would mean:

  • Anyone joining a new pension scheme from 12 February 2021 onwards would have an NMPA of 57 from 2028 for that scheme, although they may have other pensions that they could still access before age 57.
  • From 12 February 2021, anyone who transfers to a new scheme would lose the right to take benefits from that pension before age 57 (assuming the original scheme offered that right), unless they completed a block transfer.

One key difference highlighted between the rules for existing protected pension ages and these proposals, is that clients would not need to crystallise all the benefits within a scheme on the same date in order to keep their protected pension age.

Next steps

The timing of proposals like these is always difficult. The consultation doesn’t close until 22 April, and we don’t expect to see draft legislation from the Treasury until the summer. However, if the proposals do go ahead as they stand, transfers that take place from today could affect when clients are able to take benefits. While many people may not expect to retire at 55 or 56 (and until yesterday might have assumed it simply wouldn’t be an option), it still adds an additional consideration into people’s pension planning.

It’s still early days, and I’m sure you’ll see more about the industry’s thoughts about the proposals over the coming weeks. What seemed like a very straight forward upcoming pension change has suddenly become something to keep a keen eye on.

Our Comment

We need to see what the outcome is in the summer, but this is one to watch for those who are considering retiring early at age 55 or if you thought you might access your pension benefits, typically tax free cash, early at age 55 from 2028.

In real terms this will only be a few people, most in the UK haven’t got the pension assets they need for early retirement and shouldn’t access their pension funds too early either.

However, if you are one of the few that may have a plan to retire early or access your pension benefits early, at age 55, from 2028 you now need to be careful about any pension switching or consolidation. Let’s see what we get at the end of the consultation, hopefully draft legislation in the summer.  Watch this space.

Steve Speed


Technical content cut and pasted from Curtis Banks Technical Update.

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ESG: Lessons from the COVID crisis

Fund managers Invesco published a paper last week called ‘Appetite for change: food, ESG and the nexus of nature’ which looks at the impact of the Covid pandemic on ESG considerations.

We have picked out some of the key points from this paper below and added our own commentary in blue.

ESG Recap

Before we look at Invesco’s paper and the points they raised, lets recap on what ESG is.

ESG stands for Environmental, Social and Governance. Investopedia definition for ESG is; ‘Environmental, social and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments.’

The key points raised by the Invesco paper are as follows:

  • The COVID-19 crisis has demonstrated that humanity’s understanding of its own relationship with the natural world remains inadequate – often dangerously so.
  • The pandemic has particularly exposed the interconnectedness of numerous existential threats, all of which might be described as components of the “nexus of nature”.
  • One of the most perilous yet underappreciated of these threats is the unsustainability of prevailing attitudes towards food production and consumption.
  • From the use of resources in developing countries to policies and practices around factory farming in the industrialised world, this issue affects the entire value chain.
  • Guided by the idea of materiality and initiatives such as FAIRR (Established by the Jeremy Coller Foundation, the FAIRR Initiative is a collaborative investor network that raises awareness of the environmental, social and governance (ESG) risks and opportunities caused by intensive animal production), investors are increasingly applying environmental, social and governance (ESG) principles in this sector.
  • As well as promoting and protecting sustainable investments, these efforts are showing how positive change in one area can benefit the nexus of nature more widely.
  • Interconnectedness means that the ripple effects can encompass concerns including deforestation, biodiversity loss, waste pollution, climate change and human health.

The ‘nexus of nature’

The longer-term survival of our planet and its inhabitants is strongly connected to various existential threats that are themselves highly interrelated. They include climate change, overpopulation, deforestation, loss of biodiversity and – perhaps least appreciated – the ways in which food is produced and consumed. In turn, each of these has a major influence on our health and wellbeing.

The World Economic Forum’s latest Global Risks Report underlines this. Eight of the 10 potentially most impactful risks over the next decade can be linked to humanity’s tendency to take the natural world for granted. Only weapons of mass destruction and cyber-attacks can reasonably be thought of as removed from the nexus of nature.

Why is it so important to grasp how food production and consumption might fit into this picture? The short explanation is that many of the practices that have become commonplace in the face of ever-rising demand for animal protein have consequences that are both far-reaching and deleterious. There may be no better illustration than the circumstances behind the advent of COVID-19.

As has been extensively documented, one of the likeliest sources of the outbreak was a “wet market” where livestock was reportedly kept in close proximity to dead animals. Here, originating either in bats or pangolins, the virus is believed to have been transmitted to humans via a process of zoonosis.

Something analogous happened in the late 1990s, when the emergence of the Nipah virus provided a salutary demonstration of how the nexus of nature can function. Native fruit bats were driven from their traditional habitats by deforestation; they started foraging in trees near farms; through their bodily fluids, they infected land used for raising pigs; and the pigs duly passed the disease on to farmers and abattoir employees.

Similarly, the SARS virus of 2002 is now thought to have come from horseshoe bats, eventually reaching humans via consumption of cat-like mammals known as civets. This, too, was an ominous warning of our collective vulnerability to a type of natural hyperconnectivity that is often woefully underestimated or wilfully ignored.

At first glance, given the circumstances surrounding these examples, it may be tempting to infer that the nexus of nature is at its most threatening in relatively rural settings or in developing economies. In fact, this is far from the case. As we explain in the next chapter, the phenomenon is present throughout the value chain of food production and consumption and represents a genuinely worldwide concern.

According to the World Economic Forum (WEF), risks related to the natural world now dominate the existential threats confronting humanity. They have gradually displaced economic, geopolitical and societal concerns in recent years, particularly since 2011.

The top 10 potentially most impactful global risks over the next decade, as collated in the WEF’s latest report, are shown below. Note that even those classified as societal are in some way linked to nature.

Intensive food production through the lens of material ESG risk

The FAIRR initiative is a collaborative investor network that raises awareness of the ESG risks and opportunities caused by the intensive farming of animals. Through its research, it helps investors integrate such factors into their decision-making and active stewardship processes. FAIRR has identified 28 material ESG issues that could affect factory farms’ financial performance and returns. Set out below, they include community health impacts and infectious diseases.


The COVID-19 crisis has underlined the hyperconnectivity of multiple existential threats, all of them constituents of the nexus of nature. It has also highlighted the position within the nexus of food production and consumption, and in doing so it has provided a stark warning that many of the prevailing policies and practices within this arena are likely to prove unsustainable.

Of course, investors have no more entitlement than anyone else to pass judgment on what is right or wrong. They are not self-appointed saviours or heroes. They do not constitute a deus ex machina for this sector or any other.

Relatedly, investors do not have all the answers. In food production and consumption, as in so many corporate spheres, progress and transformation stem in the main from the companies themselves and from the gathering weight of scientific evidence.

What investors do have, though, is capital; and it is capital that enables positive, lasting change to take place. This has already been demonstrated in a variety of settings, and it is now increasingly being demonstrated in reshaping how we meet the challenges of feeding an ever-growing global population – as we will explore in more detail in our next paper.

By applying ESG principles, investors can make a difference – one likely to have far-reaching impacts. This is the essence of responsible investing and shareholder capitalism, as is already well known, but it is also the essence of the nexus of nature. Positive, lasting change in one area should lead to positive, lasting change in many others – just as the bleak effects of taking the natural world for granted in one area have been felt in many others in the past.

Deforestation, biodiversity loss, waste pollution, climate change, human health – responsible investments in food production and consumption can play a part in addressing all these issues and many more. Nature’s boundless imagination, as so admired by Richard Feynman, guarantees as much.

Feynman once also memorably remarked: “Nature cannot be fooled.” This truth has become all too obvious in recent decades and during 2020 in particular. By engaging with companies and policymakers and by supporting initiatives that prize sustainability, transparency and accountability, investors can go a long way towards helping ensure that humanity does not fool itself.

Our Comments

We have been talking about ESG for a while now, and as we have noted before, the pandemic has really put this topic under the spotlight. As you can see from the key points of the Invesco paper that we have picked out, ESG is a wide-ranging topic and is much more than just ‘being a ‘good’ investor.

The principles behind ESG need to be embedded in an investment framework which encourages positive change.

We build ESG into our ongoing due diligence process to ensure we have a wide range of ‘core investments’ for our clients, which not only seek to provide good returns, but also to drive ESG forward and make lasting and positive impacts in the world.

More investment managers and fund houses are launching ESG investments or starting to move in the right direction with their existing investment offerings, engaging with businesses they invest in.

The demand for ESG and socially responsible investments is growing. Even in the past few months, the term ESG is seen much more in the financial press now than it was.

One thing investors and we as an independent financial advice firm need to watch out for is ‘greenwashing’.

Greenwashing is the process of conveying a false impression or providing misleading information about how a company’s products are more environmentally sound. Greenwashing is considered an unsubstantiated claim to deceive consumers into believing that a company’s products are environmentally friendly.

This can be an attempt to capitalise on growing demand for socially responsible investments.

We recently watched a webinar by Royal London on responsible investing and they highlighted that 85% of funds labelled ‘green’ have misleading marketing* (*Source: 2degrees investing initiative, 2020).

We try to avoid ‘greenwashing’ by doing thorough due diligence, such as asking investment providers questions such as ‘what are their responsible investment policies?’ and ‘how is ESG integrated into investment decisions?’

Our due diligence process is also ongoing, we make sure we stay in regular contact with any of the investment providers we recommend ensuring we understand their investments and investment decisions on an ongoing basis.

The Invesco paper looked at here in this post, gives some food for thought. Invesco are a large investment house and we rely on their input and updates to help us get a handle on key investment issues alongside their peers. We quickly understand the consensus view.

Stay tuned for more on ESG and socially responsible investing along with our regular blog content providing updates and insights from a range of fund managers to help you understand what is happening in the markets and the world.

Andrew Lloyd


Team No Comments

Blackfinch Group Monday Market Update

Happy New Year and welcome to 2021!

Please see below for our first blog post of the year, a Monday Market Update from Blackfinch.

Please note, this is a 2 week update for the two-week period 21st December 2020 – 1st January 2021):

The ever-changing world we live in reinforces the importance of regular up-to-date communication. This weekly news update from our multi-asset portfolio managers provides you with a summary of global events for your reference and to share with clients.


  • On Christmas Eve, and with just days to spare, the UK Government and the European Union (EU) put pen to paper on a post-Brexit trade agreement, with UK politicians voting overwhelmingly to back the deal.
  • The UK government confirmed that a new strain of COVID-19 was sweeping across the nation. Travel bans were imposed by a significant proportion of Europe, including cross-channel trade with France. Many travel restrictions were eased within days, although the backlog continued over the festive period.
  • A post-Christmas review of lockdown tiers resulted in a further 20 million people placed into stricter Tier 4 restrictions.
  • The UK government was set to mobilise large-scale vaccination programmes, choosing to focus on ensuring a larger proportion of the public receive their first jab than was planned under the initial roll-out.
  • Third quarter Gross Domestic Product (GDP) bounced back stronger than previously reported, rising 16.0% quarter-on-quarter, following a record contraction of 18.8% in the second quarter.
  • Official figures showed the UK government borrowed £31.6bn in November.


  • Congress approved a $900 bn stimulus package in the days after Christmas, despite a last-minute hold up prompted by President Trump over payment amounts to individuals.
  • The US economy grew at a record pace in the third quarter, and quarter-on-quarter GDP was revised slightly higher, from the initial reading of 33.1% to 33.4%.
  • Jobless data for the week to the 19th December showed 803,000 new unemployment claims, down from 892,000 in the previous week.


  • Vaccine producers are confident their existing vaccines will provide similar levels of immunity against the new strain of COVID-19, although no official test results have confirmed this.
  • The UK approved the use of the AstraZeneca and Oxford University vaccine after it passed the necessary regulatory hurdles. The UK has ordered 100 million doses of the vaccine, which is easier to store than the already approved Pfizer/BioNTech version.
  • Many EU countries began their roll-out of the Pfizer/BioNTech vaccine.

Our Comment

Whilst the beginning of this year may not be as happy as usual, we can now finally see light at the end of the tunnel. Yes, the next few months are still going to be difficult with potential lockdowns and heavier restrictions, but with the vaccine roll out which has now begun, life will soon return to normal.

Of course, with this will come market volatility, however they will recover, the FTSE 100 for example is today at its highest point since early March 2020 (this is great news!).

The restrictions and lockdowns are not ideal, but it’s part of a necessary plan to control this virus once and for all, plus, lockdowns are easier to deal with now than they were last year, as this time we know what to expect compared to the end of March last year, when it was all brand new unchartered territory for us, people and businesses (see what I did there?) know how to adapt better now.

Soon the US will inaugurate Present Elect, Joe Biden, into the White House, the mass vaccine roll out is now underway, whilst the next months will still be bumpy, we now have plenty to look forward too!

Thank you to all those who read our blogs last year, and this will be the first of many to come this year. We are not slowing down and we will continue to provide you with market updates from a range of experts and fund managers, plus plenty of our own original blogs and insights into the markets and this new world we are now living in.

Again, a very Happy New Year to all our readers, and I’m sure we are all together in the view that this year will be better than the last!

Andrew Lloyd


Team No Comments

What a year that was!

You couldn’t have made it up.  If anybody had tried to tell you in January this year what was going to happen, you would have thought they had completely lost it!

We are nearly at the end of 2020 and we have been through the mill.  Covid 19 has had a severe impact on markets, economies, our health, and our wellbeing.  We have not been able to live our lives normally.

Thankfully markets and economies have started to recover. China is in a better place than it was in January.  Different sectors thrived, in particular, Technology.  With c 75% of Technology businesses in the USA their markets have fared well with indices higher.

In November, with the Biden win and then the really good news on the Pfizer vaccine, markets recovered further.  As you know we are now getting vaccinated in the UK in priority-order and we await further good news on the Oxford/Astra Zeneca vaccine.

This Oxford/Astra Zeneca vaccine will make a considerable difference as it’s easier to handle and distribute, and much lower cost.  Not only is this good news in the UK, but also globally and for developing and emerging markets.

The only issue outstanding now, which I understand is nearly resolved, is Brexit.  It looks like we are on the verge of doing a deal.  Hopefully, by the time I relax at home later on, a deal will have been done.  This will bring some certainty to the UK and the EU and we can get on with doing business.

How have we changed?

Personally, I think we have learnt a lot from this challenging year.  As people and leaders, we now hopefully do a better job, with more of an understanding of the needs of our staff and clients, family and friends.  Our culture in the business will have changed as we understand everybody’s needs better.

We now know, more than ever, that we need to work as a team and look after each other.  A healthy culture is one that is diverse and inclusive.  We need to nurture and grow our people.

In terms of investments, we have seen a significant shift to ESG (Environmental, Social and (corporate) Governance) investing.  I think this will continue as Covid 19 has made us reflect on what is important, our health, looking after our environment and dealing with climate change.

The future?

Markets appear to have priced in a good recovery.  With the vaccine roll out in the UK, we would expect volatility to continue and the economy to pick up in the second half of 2021.  We still have a few headwinds. The end of furlough could see unemployment spike and zombie businesses could close.

To counter this, the pent-up demand of consumers will help, if the vaccine roll out is fast and efficient and people in the UK can return to their normal spending habits and make up for this year.

We also need to see the vaccine roll out globally so our amazing scientists and health care professionals can deal with any further mutation of the virus.  Technology and further developments will help too.

I feel positive about the future. It’s been a tough year, but the outlook is brighter.  Innovation and science will really help as we work hard to recover economies globally.

Thank you for reading our blogs. Hopefully, they help keep you informed in this fast-changing world we live in.  If you have any specific questions, please get in touch.

Merry Christmas and a happy, healthy, and prosperous New Year!

Steve Speed


Festive opening hours

24/12/2020 close at noon.

 Return on 29/12/2020 for standard office hours on both 29/12 and 30/12.

Close at noon on 31/12/2020.

Return to normal working practices on 04/01/2021

Team No Comments

Jupiter: Views from the House

Please see the below look back at 2020 from Jupiter Asset Management’s Chief Investment Officer:

Jupiter’s Chief Investment Officer reflects on the longer-term implications of a year most unlike any other.

In a year overwhelmingly dominated by the pandemic, it could be tempting to dwell on the challenges that have been presented to businesses and to global society.

Long before any of us had heard – let alone uttered – the words “COVID-19,” there was a trend towards more flexible working in many sectors of the economy, including in asset management. Some in our industry were embracing growing requests for more flexible working arrangements, while others may have viewed them with a certain degree of scepticism, pondering whether fund management was the kind of industry that could accommodate such arrangements at scale.

As much of the world went into lockdown, personal opinions on the merits and disadvantages of remote working became largely irrelevant; a significant policy decision that would, historically, have been the preserve of individual businesses was essentially taken for them.

Simultaneously, the important question as to whether a firm like ours could operate effectively with virtually all employees working remotely for a prolonged and potentially open-ended period was answered; we could, and we did. Indeed, a recent conversation with our head of dealing, Jason McAleer indicated that our industry as a whole has not only coped with the challenges presented, but has seen no perceptible increase in operational errors or issues.

In my view, the changes we have seen have the potential to make asset management a fundamentally more inclusive industry. Put simply, it now feels reasonable to hope that many of those who – for oft-cited reasons, including perceptions of long hours, punishing travel schedules and reconciling the demands of a challenging career with family life – might never have considered a career in fund management, will feel newly emboldened to take a closer look.

If, like me, you believe that more diverse investment teams are better performing ones, then this can only be a welcome development from the perspective of our clients.

Inclusivity leads to diversity

The pandemic and associated changes to working patterns and practices have also reminded us of the value of the office environment, as evidenced by numerous requests from colleagues for permission – which was generally denied, in line with the official guidance at the time – to continue to work from the office as the second UK-wide lockdown came into force.

This all begs a question: how quickly will the potential benefits of changes to working patterns in our sector filter through into the reality of the make-up of our workforce? Naturally, in a profession like fund management, hiring cycles are relatively lengthy. For this, there can be no apologies; the business of taking fiduciary responsibility of other people’s money is a serious one, and it is right that those charged with this duty should first have to prove their aptitude.

Of course, recruitment decisions are largely devolved to hiring managers; while this makes it difficult to “force” change in hiring practices from above, as CIO I am committed to continuing to challenge ourselves.

Changing behaviours: impact on markets and innovation

For a business like Jupiter, one of the more testing trends to emerge over the last year has been a tangible increase in direct participation in financial markets by retail investors. The exact cause of this change in behaviour is difficult to pinpoint, but we can reasonably speculate that it may have much to do with a combination of increased market volatility creating perceptions of attractive entry points, and the simple reality of the increase in available time many people have found in lockdown.

Whatever the cause, there is no doubt that such a sharp increase in activity in stock markets among individual retail investors has had an impact not only on stock prices, but also on liquidity and on sources of liquidity.

For asset managers, this potentially disruptive trend should act as something of a wake-up call; as retail investors in growing numbers show signs of exploring different ways to put their money to work, we must remain relevant, and continue to demonstrate that our products offer value.

As a firm, we place great emphasis on the importance of fostering innovation. A particularly exciting development for us in this regard was the formalisation earlier in the year of our strategic partnership with US-based NZS Capital, LLC (“NZS”), a highly innovative investment boutique which itself focuses on identifying disruptive businesses with the potential to generate favourable outcomes simultaneously for investors, customers, employees, society, and the global environment.

2020: when ESG became truly “mainstream”

Our partnership with NZS also serves as a timely reminder of our commitment to innovation and leadership in the field of ESG investing, a topic that has enjoyed a meteoric rise in prominence over the course of the last year. Indeed, I would be unsurprised if, in the future, social anthropologists looked back on 2020 as the year ESG investing became truly “mainstream.” This is an overwhelmingly positive development, and one to be embraced.

From a fund management perspective, I believe that ESG in the years ahead will be a refinement, evolution and re-categorisation of many of the assessments managers already make when looking at an investment case. How is a company run? Do its activities and/or products cause detriment to the environment? Are its employees mistreated or endangered? Does it mistreat its customers in a way that is detrimental to them and unlikely to build long-term loyalty? Has it taken on excessive leverage in pursuit of short-term shareholder returns that might undermine its longer-term viability? For us, these are not new questions, but they are being asked of us by a broader range of clients and other stakeholders, and with a frequency and determination not before seen.

Such focus on these issues is having a marked effect on markets, and on the way in which capital is being allocated to investment managers. This, in turn is undeniably changing and disrupting perceptions of the characteristics of a business most prized by investors.

The “what” and the “how” of asset management

I believe that the single most important thing we can do as a business is to generate strong and sustainable investment returns for our clients. As the end of every year approaches, we take the time to reflect on our performance; for a year that is likely to stand out in the collective memory for many of the “wrong” reasons, in this particular regard, 2020 has been a year much like any other.

The change, challenges and uncertainties we have all faced notwithstanding, it is pleasing to see that many of our strategies have performed very well throughout this period. Meanwhile, the new colleagues who joined Jupiter through our acquisition of Merian Global Investors have already made a significant contribution to Jupiter, bringing fresh energy, ideas, and perspectives to our debates.

But investment and performance are not the only things about which we hear from clients, who increasingly want to know how a firm like Jupiter manages its money managers. This is perhaps the most important part of the role of the CIO office, and it has been a privilege to speak with so many clients over the course of the year about how we seek to hold our fund managers to account. Put another way, it might be said that in 2020, what we seek to do (generate strong, sustainable investment performance), and how we go about it have become first among equals in the pecking order of clients’ priorities.

In truth, nobody knows how 2021 will play out. With the promise that vaccine programmes may be imminently deployed, a final end to the next chapter of Britain’s exit from the EU in sight, and a the potential for a more stable geopolitical scenario, it is tempting to look forward to the coming year with a great sense of optimism. At the same time, none of us must be under any illusion over the scale of the challenges facing the global economy as the world emerges from the pandemic. Whatever happens, our focus in the CIO office will be on seeking to ensure we deliver the best performance we can, in the most sustainable way we can; it is this pursuit, I believe, that gives us our real licence to operate.

As the end of every year approaches, reflections on the year we are about to leave behind tend to come naturally to everyone.

Look backs at the financial world and investment markets pour out from fund managers followed by outlooks, predictions, and goals for the year ahead.

2020 was a year that nobody could have predicted, and a year I’m sure nobody will look back fondly on.

One of the (positive) key points that can be taken away from this year (as demonstrated in the article above) is something we have been talking about for a while now, ESG is now mainstream.

It’s real, it’s important and it’s here to stay.

From firms and fund managers beginning their ESG journey, to the ones talking about how they already factor in a strong ESG process within their operations.

Whatever our industry takes away from this year, one thing is for sure, ESG is now firmly on everyone’s radar.

Andrew Lloyd


Team No Comments

Janus Henderson ESG Thought Pieces and Our Thoughts

Investment Management House Janus Henderson recently published some thought pieces on ESG and Socially Responsible Investing. Please see the key takeaways from these pieces below:

Sustainable equities: the future is green and digital

  • The pandemic has accelerated investment into digitalisation, which we consider to be a key enabler of sustainability.
  • We expect support for sustainable development to gain momentum as countries embrace the need to be low carbon and as Joe Biden takes his seat in the White House.
  • Investment into electric vehicles is expected to surge in 2021 as innovators ‘race’ to the top.

Sustainable design in consumer products

  • The apparel sector is well known for its detrimental effects on the environment. However, as consumers become more aware of their own environmental footprints, there has been a surge in demand for sustainable goods.
  • A circular economy is based on the principles of designing out waste and pollution, keeping products and materials in use, and regenerating natural systems.
  • Companies including Nike, Adidas and DS Smith have incorporated a circular approach to the design and production of their goods, creating durable and long-lasting products with a reduced environmental footprint.

Investing in Diversity: analysing the investment risks and opportunities

  • Companies are increasingly being held accountable by consumers who reward brands aligned with their values.
  • For many global businesses, matters of diversity and inclusion go beyond the workplace, and efforts are made to address discrimination in the countries in which they operate.
  • Investors should be wary of companies that fail to futureproof themselves in terms of diversity. Socially conscious brands that make inclusivity a central part of their business strategy and brand ethos are more likely to succeed.
  • What gets measured, gets improved. Investors should focus on company disclosure, diversity-related targets, and meaningful initiatives in place. A list of suggested investor questions can be found at the end of this paper.

Janus Henderson are ahead of the game with ESG policies and started factoring this in back in 1991 shortly following the 1987 United Nations Report, ‘Our Common Future’ which I mentioned recently in an ESG blog. Their philosophy is below;

‘We believe there is a strong link between sustainable development, innovation and long term compounding growth.

Our investment framework seeks to invest in companies that have a positive impact on the environment and society, while at the same time helping us stay on the right side of disruption.

We believe this approach will provide clients with a persistent return source, deliver future compound growth and help mitigate downside risk.’

As I wrote about in our blog, as a firm we undertake regular due diligence with regards to the investments we recommend to our clients. This an ongoing process and we are constantly monitoring the market, and this year ESG has become a key factor in what we look for in the due diligence process.

Of course, many businesses may have a broad and generic ESG statement, but having a strong and well defined ESG process embedded into a businesses culture and investment process is definitely one of our key determining factors in the companies we choose to recommend.

We start off with an investment houses ESG statement, but then we dig deeper, to make sure these investments do exactly what they say they do, in terms of ESG, then factor this into the rest of our research i.e. investment returns, track records, cost etc.

It’s good to see so many investment houses now openly talking about and promoting ESG and demonstrating their views and philosophies.

Now could be a great time to invest whilst asset prices are still generally low, all whilst taking a responsible approach to investing!

As always, keep checking back for a variety of blog content from a wide range of investment houses, fund managers and our own original pieces.

Andrew Lloyd