1875 Summer 2021

1875

A PUBLICATION FROM REDMAYNE BENTLEY

SUMMER 2021

THE FINAL DAYS OF FOSSIL FUELS? VOLKSWAGEN TO VOLTSWAGEN Yes, You Can Teach an Old Dog New Tricks

THE RISE OF EVS LOCKDOWN TO ELECTRIC AVENUE HYDROGEN VS ELECTRIC: The Charging Space, Race

1875

CONTENTS

INTRODUCTION 2 Gas Roots

INSIGHT 4 The Rise of EVs

VOLKSWAGEN TO VOLTSWAGEN

6

LOCKDOWN TO ELECTRIC AVENUE

10

HYDROGEN VS ELECTRIC

12

INVESTMENT AND SAVINGS PRODUCTS FOR CHILDREN

14

OPENING HOURS

Monday–Friday, 08:00–17:00 GIVE FEEDBACK

publications@redmayne.co.uk HEAD OFFICE

0113 243 6941 FOR MORE DETAILS

redmayne.co.uk

RISK WARNING Investments and income arising from them can fall as well as rise in value.

Past performance and forecasts are not reliable indicators of future results and performance. There is an extra risk of losing money when shares are bought in some smaller companies. Redmayne Bentley has taken steps to ensure the accuracy of the information provided.

Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned 2

“As the most valuable car compan Tesla investors are placing a lot of h to come out on top. The next decade time for all participants as they rac

ny in the world, hope in its ability e will be a crucial ce to the finish.”

1875

GAS ROOTS JAMES ROWBURY | INVESTMENT RESEARCH LEAD

There’s a car race on and it’s the third lap. The newly formed ‘Team Tesla’ is in pole position and its star driver, Elon Musk, got off to a flying start. His most adoring fans think he’s got this one tied up, but the rest of the grid have just changed their tires and are gaining ground on the race leader. With so many laps to go, it’s all to play for; this will be closer than many expect.

Mr Musk’s notoriety is dichotomous.

Many have criticised not only the quality of his cars, but his ability to manage a half trillion-dollar company.

He’s been the subject of US Securities and Exchange Commission (SEC) investigations, a media storm for consuming illicit substances in an interview and, more recently, received condemnation over his wavering support of Bitcoin, which has been attributed to severe volatility in crypto-currency markets.

Nevertheless, Tesla has blazed a trail for electric vehicles (EVs) in such unexpected fashion, leaving many of the world’s stalwarts in the dust. Focusing on battery technology and affordability, Tesla has single-handedly proved that EVs are a viable alternative to the traditional internal combustion engine (ICE). It has also shown that people will buy them; Tesla’s vehicle sales have skyrocketed from just under 20,000 in 2015 to almost ten times that by 2020!

But what about the others? Have they fallen asleep at the wheel? (See: The Rise of the EVs) As government targets push the automotive sector to develop new ways to lower their contribution to global emissions, carmakers have had the rug pulled from beneath them.

Their existing operations and expertise have not done them any favours here; mechanical engineers are being replaced by software engineers, manufacturing facilities need rebuilding, and entire workforces need retraining. If you thought the big players would make the switch to EV seamlessly, then think again.

Of course, the tide is now turning, and most businesses are planning for an electric future (See: Volkswagen to Voltswagen – Yes, You Can Teach an Old Dog New Tricks). Volkswagen, one the most respected brands in the motoring world, wants half of its vehicle sales to be electric by 2030 and has committed vast amounts of investment to ensure it’s on the right side of this change.

There are alternatives, though. VHS vs Betamax, HD DVD vs Blu-Ray, and Xbox vs PlayStation are all familiar historic battles for the consumer.

Hydrogen fuel, an alternative to petroleum, has all the green credentials of an electric powered vehicle.

Nonetheless, it has perhaps entered the race too late and is losing out to the network effect of EV charging stations (see Hydrogen vs Electric: The Charging Space, Race). With more appropriate uses in commercial vehicles, it might not suffer the fate of previous second fiddle technologies. It’s certainly one to watch.

As the most valuable car company in the world, Tesla investors are placing a lot of hope in its ability to come out on top. The next decade will be a crucial time for all participants as they race to the finish. Tesla owners are here to experience a slice of the future, but car consumers are loyal to their trusted brand. One thing is for certain, it’s about to get interesting.

3

1875

INSIGHT THE RISE OF THE EVS BEN STANIFORTH | RESEARCH ANALYST

For years the automotive sector was dominated by a handful of companies. Firms such as Volkswagen (VW), Daimler, Ford and Toyota had been enjoying strength and unparalleled brand awareness in their home markets and across the globe with their history and reputation helping to entrench their market positioning. However, as is the case with many markets dominated by a small number of companies, they lacked the motivation to innovate and were content with incremental improvements to their already successful products. More recently, a shift in consumer priorities and a more general focus on environmental issues has created a plethora of new electric vehicle (EV) companies, forcing significant change within the industry.

This increase in popularity of alternative fuels and renewable energy has caused a monumental shift within the industry, with established carmakers forced to shift their entire strategy in order to rotate towards EVs. VW, the largest car maker globally by number of units sold, recently announced that it is to invest

€73bn, nearly half of its €150bn investment budget, into digital and electric vehicle technologies, a marked turnaround for such a titan of the auto industry.

While changing consumer tastes and pressure from governments has helped to force change at the car companies, nothing quite like competition has the ability to force corporate hands. The 21st century has witnessed an increase in the dominance of technology in human lives and a new wave of tech companies. The auto industry, while slow to adopt this technology, has seen a large number of new companies cropping up globally in order to meet rising demand from consumers and those with a particular focus on integrated technology and an acute focus on the customer have succeeded. Tesla, perhaps the most high-profile example, has been able to do this perfectly, rewarding shareholders in the process by creating an agile business model that produces elegant looking cars with selfdriving capabilities and large touch screen displays, innovations that incumbent firms have snubbed until now.

UK MARKET SHARE OF SELECTED VEHICLE TYPES

60% 40% 20% 0%

2019

2020 PETROL

DIESEL

2021YTD

JUN-21

BATTERY & PLUG-IN HYBRID EV Source: The Society of Motor Manufacturers and Traders

4

1875

300

5YR SHARE PRICE COMPARISON – VW & VOLVO VS EURO STOXX 50 250

200

150

100

50

0 15/07/16

15/01/17

15/07/17

15/01/18

15/07/18

VOLVO

VW

15/01/19

VW

Euro Stoxx 50

15/07/19

15/01/20

15/07/20

15/01/21

15/07/21

Volvo

EURO STOXX 50 Source: Redmayne Bentley

While the EV market is currently small relative to traditional combustion engines, it is growing at a rapid pace and is quickly taking market share from petrol and diesel engine cars. In fact, as of June 2021, battery and plug-in hybrid EV sales accounted for 17.2% of all car registrations in the UK, up from just 3.1% in 2019, bringing the total new passenger plug in registrations so far this year to 132,000.

The popularity of EVs has grown so much so that the UK’s best-selling car during the month of June this year was the Tesla Model 3, selling nearly 5,500 units, over 800 more than its closest competitor. While EVs still have a way to go in total yearly sales, with none in the top ten best-selling year-to-date, recent data suggests consumers are registering new battery and plug-in hybrids at a rapid pace.

housing two Tesla factories, helping the company appeal to local consumers. The Asian superpower now accounts for 20% of the California-based firm’s sales and more than doubled its local revenue in 2020.

It’s not just car companies that have taken notice of the impressive potential EVs offer, though.

Investors have been keen to pour cash into those companies committed to rotating towards the electric future.

While Tesla’s meteoric share price rise since late 2019 offers a clear indicator of investor confidence in the company’s strategy and demand, incumbents that have committed to an EV future have also provided strong investments, especially in recent years. VW and Volvo have both committed large sums of money and resources towards building large EV portfolios and capitalising on the growth opportunities that electric technology offers. Shareholders have been both encouraged and rewarded in recent years as the additional growth and improved profitability prospects push shares higher after years of sluggish growth and a lack of innovation.

The popularity of EVs has grown so much so that the UK’s best-selling car during the month of June this year was the Tesla Model 3, selling nearly 5,500 units, over 800 more than its closest competitor.

The UK and other major European markets have started to follow in the footsteps of nations such as The Netherlands and Norway, key markets initially for EV companies. A mixture of consumer interest surrounding environmental issues and governmental incentives has helped the two countries become some of the largest markets for EV companies, despite their relatively small population sizes.

In 2020, 54.3% of all cars sold in Norway were electric, with the country now accounting for more than 10% of Europe’s total EV sales, impressive for a country of just over five million people.

However, while Europe’s EV growth is striking, it is China that offers new companies the largest market, owning approximately 44% of all electric vehicles and grown 36% from 2016 to 2020.

Early adoption of this trend has helped many non-Chinese firms capitalise on the growth in the region, with Shanghai now

We would expect this outperformance to continue, at least into the short/medium term as companies that are better positioned for the inevitable EV rotation are quick to carve out market share, leaving the laggards behind. The introduction of pureplay EV companies, like Tesla and Nio, into the auto sector should help to catalyse both further growth and promote innovation, with investment into self-driving capabilities and other alternative fuel sources such as hydrogen, providing exciting opportunities amongst rapid change in the industry.

5

1875

VOLKSWAGEN TO VOLTSWAGEN YES, YOU CAN TEACH AN OLD DOG NEW TRICKS

The shift away from internal combustion engine (ICE) vehicles towards electric vehicles (EVs) is intensifying, as hypothesised rules and regulations regarding emissions become reality. In November of last year, UK Prime Minister Boris Johnson announced a blanket ban from 2030 on the sale of new cars powered by petrol or diesel.

Later this year, the European Union is expected to finalise plans for ‘Euro 7’ – regulation likely to make expensive emissions reducing technology mandatory for all ICE powered vehicles, potentially leaving them unviable to produce as early as 2026. It isn’t just government intervention that is driving the shift either; growing consumer demand for all-electric vehicles has led to financial markets pricing Elon Musk’s Tesla Inc as the world’s most valuable car company.

The race to capitalise on this shift and dominate electric vehicle production is far from over, and the world’s largest car manufacturer by revenue and second largest by production volume - Volkswagen Group - is poised to win. Earlier this year on 29th March, the Group found itself in a media storm over an April Fools prank, declaring it would be changing its name to ‘Voltswagen’ and insisting to media outlets that such plans were no joke.

The following day saw VW’s share price up by as much as 10% at one point as investors took the bait and saw the rebranding as a clear commitment to a renewed focus on electric vehicle production. Despite a reported SEC probe and many embarrassed journalists labelling the stunt a disaster, in an age of social media mania it was a modern masterclass.

Celebrity influence on social media spearheaded by the likes of Donald Trump and Elon Musk has re-written the rulebook of public relations, and VW Chief Executive Herbert Diess understands this as well as anyone. A far cry from the typically staid German corporate, Diess is said to chair a weekly social media planning meeting to discuss how to steal some of Tesla’s internet sensationalism, has taunted Elon Musk on Twitter and posed wearing a batman mask on LinkedIn. A chief executive who understands the importance of tapping into this new era of brand populism is vital, and the firm’s supervisory board clearly agree, as it recently agreed to extend Mr Diess’ contract until 2025.

6

1875

Volkswagen’s yearly revenue is nearly eight times that of Tesla’s, yet a share in Tesla currently costs investors over two and a half times more than a similar sized share of Volkswagen.

Whether this is down to a market bubble or a genuine belief in Tesla’s growth prospects, many remain puzzled at just how Mr Musk has achieved such a sustained high valuation for his company, in spite of a more bearish trend this year.

Nevertheless, it has given Tesla extraordinarily easy access to funding, allowing it to remain head and shoulders above competitors in terms of technological advances. However, relying on share price for future funding is risky, especially when the US tech market is at continued risk of correction.

Volkswagen’s far superior revenue means it can use a more sustainable approach to financing – utilising cash flow from traditional business activities to continue developing its electric technologies. German auto analyst Matt Schmidt argues that this could well explain disappointing EV sales in China, Volkswagen’s biggest market, suggesting that VW China’s strategy may be to continue driving profitable ICE sales for the next two years to organically finance the company’s shift towards EVs in the region. Another plaudit of this reliable funding approach is Arndt Ellinghorst, Bernstein analyst, who was impressed by VW’s revenue figures for the first half of this year and added “it is refreshing to see such huge numbers from a traditional manufacturer… it is certainly harder earned than some of the SPAC cash flying around these days”. This of course is a nod to the frenzy of special purpose acquisition companies (SPACs) or ‘blank cheque companies’ whereby a firm raises funds in an IPO with the aim to subsequently merge with a private company and take it public. Forbes recently reported that five separate EV start-ups financed through SPACs over the past year have since lost a collective US$40bn in market value, and all five are yet to produce a single car.

One potential hurdle for Volkswagen’s EVs is a lack of experience in the technology space. EVs are fast being seen as computers on wheels, and many argue that to truly make it as a dominant force in the industry, manufacturers must be technology companies first and vehicle companies second.

Apple’s desire to bring an ‘iCar’ to market is no secret, while Sony has already produced its first concept vehicle, the Vision S. The success of Tesla has shown that the once impenetrable automobile market is not completely closed to newcomers, and the impeccable brand loyalty that big tech companies often possess would be a huge advantage in the car industry.

Unfortunately, Volkswagen’s most famous technological accomplishment thus far is its ‘Dieselgate’ software, used in over 11 million vehicles to cheat emissions tests, a scandal which caused shares to more than halve in value throughout 2015. Volkswagen will pin its hopes on the remaining barriers to entry in the notoriously unprofitable automobile market keeping big tech away long enough to establish itself as number one.

95% of material is reusable; up to 70% of traditional ICE vehicles are comprised of raw ferrous metal. EVs are far more complex by material design, comprised from a multitude of components in circuits and battery packs, making the recycling process considerably less straightforward. To address the issue, Volkswagen recently opened a battery recycling plant in Salzgitter near Hanover, dedicated to working closely with battery experts to work out how to design EV parts with recyclability in mind from the beginning. This approach from the Group will not only please those investors with interests in environmental issues, but it shows a real confidence in the Group’s willingness to be a pioneer in the lifecycle processes of electric vehicles far into the future.

Casting our eye to the current fundamentals, June saw Volkswagen inform shareholders that deliveries between January and May were up 33% from the same period last year, and sales for traditional truck brands Man and Scania were up 68% and 61% respectively. This month, the company revealed that it expects to make €11bn in operating profits for the first half of 2021, which would be higher than the €10.6bn made in 2020 and the €9.6bn for the same period in 2019. Shares rallied almost 6% on the news, and the company is expected to publish full Q2 financials on 29th July. Looking exclusively at electric vehicles, Volkswagen has now overtaken Tesla to be the market leader in European EV sales, and its lead appears to be increasing. Recent growth is said to be driven by the Group’s premium brands, such as Porsche, which has seen deliveries for its all-electric Taycan rocket to 9,000 in Q1 of 2021, dwarfing the deliveries of Tesla’s equivalent Model S due to supply issues. At current growth rates, there is a possibility of the Group taking top spot in global EV sales before the end of the year.

For a while, Tesla deservedly occupied an untouchable throne in the electric vehicle market, as its sublime focus on battery innovation took the world by surprise. However, a puzzling share price in an unstable market threatens its financing ability, and an army of copycat start-ups do little but draw in overexcited investors with cash to burn. Founded in Berlin prior to the Second World War, Volkswagen Group is 87 years old, yet it still resembles the Turkish translation of its flagship Taycan: ‘lively young horse’. Some argue you can’t teach an old dog new tricks. In the case of Volkswagen and the electric vehicle revolution, perhaps that isn’t true.

A more clandestine example of Volkswagen’s increasing momentum in the EV race is its appreciation for how important recycling is for cost-cutting in vehicle production.

At present, when a petrol or diesel car is destroyed, up to

7

1875

1900 – 1

ELECTRIC V ACCOUNT ONE THIRD VEHICLES IN THE US.

1828 – 1835:

DEVELOPERS IN HUNGARY, THE NETHERLANDS AND THE US DEVELOP THE FIRST SMALL-SCALE ELECTRIC CARS

190 -12

1828 -35 1889 -91

HISTORY OF ELECTRIC VEHICLES

1889 - 1891:

THE FIRST ELECTRIC VEHICLE DEBUTS IN THE US

2020

=

2021 2021:

THE EUROPEAN UNION HOPES TO BAN SALES OF NEW PETROL AND DIESEL CARS BY 2035. BY 2049, VIRTUAL ALL CARS SOLD GLOBALLY WILL BE ELECTRIC

8

2020:

GLOBAL SALES OF ELECTRIC VEHICLES PASSES 10 MILLION. AS OF 2020, THERE WERE 1.4 MILLION EV CHARGING OUTLETS FOR PUBLIC USE, WITH 809,000 OF THESE IN CHINA AND JUST 89,000 IN THE US

2015

GLO ROA VEHI

1875

1912:

VEHICLES T FOR D OF ALL ON THE ROAD .

1971:

THE ELECTRIC POWERED NASA LUNAR ROVER IS DRIVEN ON THE MOON

00 2

1971

1901 1997:

1901:

THE FIRST HYBRID CAR, PORSCHE MIXTE, IS LAUNCHED, AND IS POWERED BY A BATTERY AND A GAS ENGINE

TOYOTA INTRODUCES THE FIRST MASS-PRODUCED HYBRID CAR, THE PRIUS

1997

2006 2015

15:

OBAL SALES OF AD-LEGAL ALL-ELECTRIC ICLES PASSES 500,000

2006:

TESLA BEGINS PRODUCTION OF A NEW ELECTRIC CAR WITH A RANGE OF OVER 200 MILES

Source: U.S Department of Energy, Bloomberg, Reuters, BBC 9

1875

LOCKDOWN TO ELECTRIC AVENUE Nissan has set out plans for a £1bn electric car hub located in Sunderland and in partnership with Envision, which will create a battery manufacturing facility (gigafactory) on site. This news follows a difficult period for the UK automotive sector due to COVID-19, with UK car production hitting its lowest level, last year, since 1984. The Japanese car maker has also announced that 1,650 new jobs will be created as a result of the hub and further jobs will be supported in the supply chain of its new generation all-electric model. This follows the success of its existing Leaf electric car, which celebrated ten years last year and has been sold across the world over half a million times.

Ideally the plant will start building the new cars in time for 2024, which is when the UK needs to increase the proportion of UK-made components in line with terms for the trade deal made with the EU. Back in January, Nissan confirmed its existing Sunderland plant was secure in the long term for the new trade deal, which requires at least 55% of the car’s value to come from the UK or EU to ensure no tariffs are applied.

This can only be good news for the company given around 70% of the cars made in the plant are exported, most of them to the EU and, therefore, additional tariffs could have had a large negative effect.

However, until further plants are announced it is unknown whether enough electric cars will be manufactured to keep up with demand. Transport and Environment (T&E), a clean transport campaign group, has said the UK could be left behind in the production of electric cars, despite the rapidly expanding market, and that car manufacturers here are amongst the worst prepared for change. The UK was one of the first countries to introduce the ban on the sale of petrol and diesel cars but being left behind may result in the UK having to rely on imported electric vehicles. Germany is expected to lead the way in manufacturing in Europe, producing 5.1million cars by 2030, with over half of them being electric. Greg Archer, UK Director of T&E said, “The Government must show the UK car industry it is serious about ending the sales of cars with engines by announcing a delivery plan to go with its commitments.” change of direction

“In a from its previous warnings around Brexit and job losses, the bosses at Nissan are confident in the future of UK production and plan to make the most out of leaving the EU. ”

When announcing the plans for the new hub, Nissan confirmed it is “moving forward to use Brexit as an opportunity”. In a change of direction from its previous warnings around Brexit and job losses, the bosses at Nissan are confident in the future of UK production and plan to make the most out of leaving the EU. Furthermore, the announcement is a step in the right direction in relation to the government’s ban on petrol and diesel cars from 2030.

Prime Minister Boris Johnson has described it as a “pivotal moment” but, while the government is contributing to the project, the overall amount has not been disclosed. It may be that more companies follow Nissan as the government has previously held talks with six car manufacturers regarding building electric car plants.

10

That said, not everyone agrees with T&E’s findings: Mike Hawes, The Society of Motor Manufacturers and Traders (SMMT) Chief Executive told the BBC that the accusation that UK car makers were not preparing for the shift towards electric cars was “utter nonsense” and “rebuilding for the next decade is now well underway with investment in local battery production beginning and a raft of new electrified models in showrooms.” Supporting this statement is a further announcement for “mission critical” plans being submitted for another gigafactory in Coventry, which could create up to 6,000 jobs and be operational by 2025 depending on investment from the private sector. The city is already home to the UK Battery Industrialisation Centre and Jaguar Land Rover, which is another brand that has shown its focus on the future, having already announced it will be all-electric by 2025. As we await further announcements, COVID-19 has highlighted the possibilities around sectors transforming to fit demand and, with nine years still to go, the shift to electric cars could be right on track.

1875

11

1875

HYDROGEN VS ELECTRIC: THE CHARGING SPACE, RACE When the 50-ton Apollo 11 rocketed humanity’s ambitions into space, it was thanks to a feat of collective human ingenuity, luck, and a small hydrogen fuel cell system weighing 100kg.

Heralded as the clean fuel of the future, hopes for hydrogen have sputtered in fits and starts. Fifty years later, with the engine coming into gear amidst a rapid personal and commercial electric vehicle revolution, can hydrogen stay in the race?

It is not for lack of trying that hydrogen has languished on the edge of the automotive industry’s horizon. Hydrogen fuel has long been exorbitantly expensive to produce yet, in recent years, this expense has fallen by 40%, from US$10/kg in 2017 to US$6/kg today, while production costs are projected to have fallen a further 60% by 2030. Is this too little too late?

The impressive fall in production costs fails to match the average cost of a lithium-ion battery pack, which plunged more than 60% from US$500 in 2013 to US$197 in 2019.

A comparison between an average electric car and the new Toyota Mirai, the world’s first mass market hydrogen car, finds the Mirai’s fuel costs four times higher. While greater economies of scale could make hydrogen fuel more cost competitive, the industry might be suffering from a chicken and egg situation, and production of electric vehicles (EVs) is only increasing.

Other factors also play a role in consumer demand, such as convenience, style and choice. Major carmakers globally are racing to provide electronic vehicles, yet in the case of hydrogen vehicles (HVs), this scramble evaporates to provide UK consumers with only two cars available. Many manufacturers have quietly shelved their hydrogen projects to gather dust rather than eat up investor capital. It is in refuelling that HVs pick up the fight, with refuel times comparable to that of their fossil fuel burning cousins.

This is in stark contrast to an electric car, where refuel times are more akin to the process that created those same fossil fuels, while the infrastructure for providing these services is still in its infancy. Start-up Hydrogen Refuelling Solutions has installed 32 refuelling stations, which already amounts to 17% of the European total, and it expects to reach 3,700 in Europe by 2030, rising to a 15,000 in 2040. From China pledging over 1,000 refuelling stations by 2030 to the EU earmarking €35bn this decade for the same purpose, governments are committing to change. When placed beside Europe’s current total of

12

285,000 charge points this year though, these figures call into question the flexibility of HVs, a key trait of a successful personal vehicle.

If not personal vehicles, then, could HVs battle for pole position in the commercial vehicle market? While a timesaving convenience measure for consumers, quick charging times are vital to the smooth operation of logistics networks. In the age of next day delivery and just-in-time inventory systems, eight-hour charging times for electric trucks impede their suitability for long-range haulage. Although an issue for wider consumers, a smaller network of hydrogen refuelling stations could be more palatable for commercial vehicles which travel fixed routes, often directly between urban centres.

At present, regulations are restricting freight weights, with a focus on conserving weight to maximise loads. Here, too, EVs fall short, weighing between three and five thousand pounds more than hydrogen powered trucks. This weight advantage has hydrogen marked a lower-cost alternative to battery power in other forms of freight such as shipping.

All being said, issues still dog hydrogen in haulage. According to Volkswagen, EVs are two to three times more efficient at converting energy than a hydrogen fuel cell, the cost of hydrogen alone tripling the cost per km relative to a battery.

New innovations could still rev hydrogen to life, with construction company JCB achieving a breakthrough in creating a hydrogen combustion engine. Such a technology could allow existing carmakers to retain decades of extensive expertise on combustion engines and shift existing production lines to provide a much-needed cost saving. It is up to declining hydrogen fuel costs, then, to swerve the economics of haulage in favour of HVs. But is a race still a race if the officials play favourites? As EVs steal the show, the UK Government vies to dangle carrots over battery powered vehicles; charging electricity levies a mere 5% VAT, but hydrogen fuel is given no such grace. The average non-luxury EV is exempt from vehicle excise duties, but no HV is at present. Employees with electric company cars face no fuel taxes, while HV drivers receive them in full.

Where, then, does the future of hydrogen-powered vehicles lie? In the race for personal vehicles, it seems to have started as EVs finish lap three. In its battle for heavy vehicles, though, hydrogen has enjoyed deep advantages that could come to see it rocket cargo straight to consumers’ doors.

1875

13

1875

INVESTMENT AND SAVINGS PRODUCTS FOR CHILDREN DAN BAXTER | INVESTMENT MANAGER

Every family wants to give a new child the best start in life but are often unaware of the options available to provide a financial head start to the newest family member. Cash is often put away in a standard bank account until needed for one of the big moments in life, but this may mean missing out on the potential for significant growth. In the current environment of almost 0% interest rate, it is important to ensure this money is working hard. Therefore, we assess some of the options available.

JUNIOR ISA The benefits of ISAs are well publicised, with everything held in the ISA being shielded from tax. Stocks and Shares ISAs and JISAs, such as those offered by Redmayne Bentley, can be held on an execution-only basis or managed by an investment manager. Returns depend on investment performance, but all income and gains are shielded from tax.

The limit for the 2020/21 tax year is £9,000 and the child can take control of the account when they’re 16, but cannot withdraw the money until they turn 18– although for these two years they are eligible to hold both a JISA and an adult cash ISA, providing a further boost to tax-free savings for two years. However, the money belongs to the child and at age 18 they are entitled to do as they please with it and their parent/ guardian retains no power over the account. It is also worth noting that money added to the ISA cannot be withdrawn until age 18, even in the case of emergency.

JUNIOR SIPP Quite understandably, one of the last thoughts for

14

a new-born is planning for their retirement, but it provides one of the most effective ways of boosting the overall value of the pot – the junior SIPP allowance is £2,880*, which is then boosted by 20% tax relief to £3,600. That’s an instant return, before we consider the potential returns of investing that money for the long-term. However, money put into a junior SIPP cannot be accessed until the child is 55, and it is legally in their name so there is no way to take it back should an emergency require you to do so. Furthermore, pension rules are constantly evolving, and it is likely that they will change again before retirement.

CHILDREN’S SAVINGS ACCOUNT These accounts can be a good way to help children develop good savings habits from a young age. Generally speaking, there’s no tax to pay on the interest generated in these accounts (although this depends on the total amount and your own personal interest income). The money belongs to the child and they take control of the account when they’re 16.

NATIONAL SAVINGS AND INVESTMENTS PREMIUM BONDS Premium bonds are backed by HM Treasury and one of the safest choices around. They provide the chance to win cash prizes ranging from £25 to £1 million every month, although the current average prize rate equates to 1% a year, which is below the usual rate of inflation, meaning that the savings are losing purchasing power.

The maximum investment amount is £50,000. *This amount is the limit for children with no earnings, should your child earn more than this amount they are eligible to increase the pension contributions.

1875

15

redmayne.co.uk