Opportunity - Issue 13 - 2020

ISSUE 13 - 2020

FEATURED IN THIS ISSUE… SOME THOUGHTS ON LONDON PROPERTY | THE RETURN OF THE NATIVE

HAPPY NEW YEAR! As we enter a new decade, I would like to wish you and your families the very best for the coming years. I would also like to thank you for entrusting us to help you manage your finances and investments.

In this current time of global uncertainty and volatility, it has never been more important to develop a clear wealth plan for your family.

By 2030 some of you will have made the shift from building your capital base, while working or building your business, into the period of using your capital to provide an income for the rest of your life. As a result, early planning is important so you have a clear approach and the greatest choices to ensure that you can achieve your objectives.

John Williams joined us in the summer and has been instrumental in building our wealth planning service. He has introduced a cashflow modelling capability that means we can work with you to make more informed and tangible financial decisions for your future.

The interactive software helps you plan and adapt to real life events by highlighting whether your future income, from investments or other sources, will cover your anticipated financial needs. This service will be invaluable for improving our advice process and enable us to be more proactive in our service. On page 4, John has written an article specifically for expats planning to return to the UK. An industry-wide change is being rolled out across Europe in 2020, designed to enhance the security of payments and provide additional protection against fraud. These changes have been prompted by the European Union’s ‘Payment Services Directive II’, known as PSD2, which sets requirements for firms that provide payment services, and will affect banks, building societies and other payment institutions and their clients.

As a result, we are making a number of changes which will help us to continue to protect your security. If you are one of our many clients who use our online banking or mobile app to make payments, you will already have noticed a change to the onetime passcode delivered to you by SMS to authenticate certain payment instructions.

From last September, each one-time passcode has been clearly linked to the individual payment, by containing details of the payment amount and the payee name.

You will begin to notice other changes to payments over the coming months, as both merchants and banks gear up to adopt all the requirements of PSD2. We’ll provide more information to you individually in the next few months, but if you have any questions, your private banker or our client services team will be happy to assist.

Incidentally, if you don’t already use our online banking and mobile app services, these offer a secure and efficient way to view your wealth and make transactions. You can find full details, including how to sign up, on our website www.nedbankprivatewealth.com, or please contact us.

We recently completed our client survey and the provisional results confirm that we have one of the highest client satisfaction ratings in the wealth management industry. This is always very pleasing to see as it is primarily driven by the interactions that you have with the Nedbank Private Wealth team. We’ll be providing more details on the survey in the next issue.

As you know, we grow through word of mouth and personal recommendations. We are always more likely to invite an individual or a family to become a client of ours when they are introduced by one of our existing clients.

With best wishes to you and your family,

Stuart Cummins, Chief Executive.

SOME THOUGHTS ON LONDON PROPERTY

By Colin Campbell, Private Banker, London Our London property seminar is now becoming an annual event to review the UK residential property market and offer an outlook for the coming 12 to 18 months.

Our latest event fell on 5 November 2019, a month before the UK general election on 12 December 2019, so it was fitting to explore the potential for any fireworks over the forthcoming year.

Speaking at the event were representatives from global real estate consultants, Knight Frank; RSM, one of the largest tax advisers in the UK for individuals and trustees; and London’s Chartered Surveyors & Valuers, whose team has covered the capital’s property market for decades.

As a private bank and wealth manager, we remain apolitical, but despite the difficulties in discussing political uncertainties, the panel debated the possible impact on clients following the vote, as well as possible developments in the current Brexit deadlock. We captured three of their key thoughts on the night: Tom Bill, head of London residential property research at Knight Frank and author of the longest running index on central London’s residential marketplace:

“

The more adverse tax landscape is now largely priced in by the market. This year has shown the extent to which political uncertainty is causing some to still hesitate.

While a wall of capital has built up and buyers are scrutinising the market for value, as political uncertainty recedes, this should translate into higher levels of activity. This repricing, combined with the impact of a weaker sterling and ultra-low mortgage rates, is underpinning demand. The extent to which pent-up demand is released in 2020 depends on the disappearance of the risk of a disorderly Brexit and the emergence of a stable government.

”

Gary Heynes, head of private clients at RSM:

“

From a tax perspective, there are still some changes coming through which may be

affecting the health of the property market, and not just in London. In April 2020, the most significant of these is the change in capital gains tax reporting which gives everyone just 30 days to report on a sale after the transaction has completed. That is a very short timeframe for buyers to pull together the full history of their relationship with the property. Added to that are changes affecting individuals with regard to their main residence. The first of these is that the previous 36-month timeline for sellers to benefit from principal private residence relief, which had already come down to 18 months, is now going to be reduced to a mere nine months. The second change is the removal of letting relief. Both of these could mean more individuals are drawn into the scope of capital gains tax, just as the window for calculating and paying the tax shortens.

”

Simon White, managing director of London’s Chartered Surveyors & Valuers:

“

Although the London market in the last year has dropped by 2% in terms of value and 8% in terms of the number of properties coming to the market, there is still value in the capital. Aside from the effects of gentrification that still impact many areas, other factors are leading to some areas seeing a rise in value now. Areas such as Battersea are enjoying an increase due to the continued domestic demand for the right property, while areas such as Whitechapel and Lewisham are seeing the impact of better transport links – due to the Elizabeth line and extension of the Bakerloo line respectively. It’s not all bad news and there is still some considerable value to be had, particularly over the longer term.

”

The evening coincided with the launch of a campaign to promote our flexible, quick and tailored lending solutions via the website https://lending.nedbankprivatewealth.com.

If you are interested in learning more about our lending services, please visit the website or get in touch with your private banker.

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THE RETURN OF THE NATIVE

By John Williams, Head of Wealth Planning

Returning to the UK may not be quite as straightforward as you anticipate if you’ve been living abroad for some time. It definitely pays to think ahead, and careful planning and preparation is essential to ensure you avoid making any costly mistakes.

You may consider moving back to the UK for any number of reasons. Even though you will be returning to your home country, it’s still not as easy as choosing where you want to live and packing your bags. Providing your move is not driven by specific circumstances, it’s vitally important you give yourself enough time to prepare as there are a number of other factors that you should address before you book the removal men:

Tax residence status The test for this is the statutory residence test (SRT), which specifies how much time you can spend in the UK before you are considered resident. There is a risk you could accidentally trigger residency in as little as 16 days if you spend too much time in the UK while organising your move. It is also important to understand when you will be classed as tax resident in the UK to ensure that you pay the correct tax in both jurisdictions. The conditions for SRT are complex and it is recommended that you take specialist tax advice based on your personal circumstances.

Letting HMRC know It is important to re-register with the UK tax authorities and you can check your filing obligations beforehand on the HMRC website. You may need to register for Self-Assessment, for example, if you start working for yourself or have income or gains from the UK or abroad.

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Split-year rules If you are moving part of the way through the UK tax year, you may qualify for splityear treatment. This means the SRT automatically splits the tax year into two parts depending on the start of your residency back in the UK. Tax is then applied as a non-UK resident while you are overseas and a UK resident for the UK part of the year. If you do not meet the conditions for split-year treatment in your year of arrival, you will be taxed as if your UK residence began at the start of the UK tax year (on 6 April), even if you arrive in the country at a later date.

Returning to the UK within five years You may have to pay tax on certain income or gains made while you were non-resident.

Realising Assets It is advisable to review your investments and consider selling any assets that have risen in value while you were abroad, with a view to ‘crystallising’ those gains before you become UK tax resident.

Investments, pensions and QROPS It will be necessary to review your existing investments and pension arrangements to ensure that they remain appropriate once you become UK resident. It is worth considering the use of tax-efficient investment structures in the UK, such as ISAs and single premium life assurance bonds. For this reason, it is recommended that you speak to a wealth planning specialist to discuss the impact of your planned move on your existing finances. If you have a QROPS, you must inform your QROPS provider that you intend to return to the UK.

Review your will You should always have an up-to-date will that will cover your assets in the country you will be living and working.

As you can see, it’s important that you allow yourself enough time to take professional advice and put your financial affairs in order. If you can, it pays to allow 12 to 18 months to plan your move. Our wealth planning specialists can help by working with you to fully understand your situation and ensure your move can be made as seamlessly as possible. We do this by developing a bespoke financial plan to help you meet your objectives, both before and after you become a UK resident. We will also work with your existing tax adviser or can introduce you to a new one to ensure your move is made in the most tax-efficient way.

As a private bank, we can also provide a range of complementary investment, structuring, banking, foreign exchange and lending services to support you in your move. To find out more about how our wealth planning specialists can help you manage your return to the UK, please get in touch.

“You might miss the unpredictable weather, a traditional Sunday roast or a proper cup of tea, or you’ve simply started to tire of the expat life.”

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SETTING UP THE BANK OF MUM AND DAD

By Alex Jeffries, Private Banker

Some statistics for the UK housing market make for difficult reading for parents. In the last decade alone, UK house prices have increased almost three times faster than earnings. That means it is much more difficult for the next generations to buy their own home rather than rent.

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More recently, however, the uncertainty of the EU-UK Brexit negotiations has put a dampener on house price growth in many of our major cities, with London prices, in particular, falling back to mid-2015 levels. It has not happened for all cities – Birmingham, Leeds and Manchester have bucked that trend, but it has encouraged the view that affordability may improve.

The Brexit-related uncertainty is likely to continue. The current deadline for an agreement stands at the end of January 2020, but that deal is actually only a treaty that will see Britain withdraw from EU membership. A transition period will then follow where the future relationship between the EU and UK needs to be agreed. Unfortunately the ‘no-deal’ scenario dominating news is not off the table yet.

None of this backdrop is changing the demand for the bank of mum and dad’s support. They are still one of the main lenders helping with family borrowing. In fact, the figures for 2019 are up an estimated 10% versus 2018. It’s a source of lending that is also unlikely to disappear since those in their 60s are the wealthiest age group.

If you are in a position to help your children financially, particularly to help them get a foot on the UK property ladder, there are three things we believe you should think through: 1. Balancing ownership versus control This is a decision as to whether you gift the property to your child or co-own it. Gifting the entire property helps your child and your inheritance tax planning once the seven-year rule on ‘gifts’ is behind you. However, your investment could be put at risk if your child divorces or if your child simply sells the property for the proceeds. Co-ownership in this case could help you retain some control, but it still leaves money tied up within your estate for inheritance tax purposes.

2. Covering the finances The capital at stake here typically comes from a wide range of sources. Some clients are fortunate to be able to use cash. Others may end up dipping into funds that they have put aside for other uses, of which retirement is a common one. You could consider lending the money to your child directly or helping provide the security necessary for a bank loan. This helps you manage the risks linked to losing the investment you made for your child. From an inheritance tax perspective, however, the loan is still legally part of your estate. It is only once they have repaid the loan that the seven-year rule clock starts ticking.

3. Getting advice Whatever approach you choose for your family, in conjunction with your child, get advice, particularly on the tax implications of any decisions. This is really important and, while Nedbank Private Wealth doesn’t give individual tax advice, we regularly work with clients and their advisers to help determine the right solution for them now and in the future. There are a number of options to think through. This discussion is also important from a cash flow perspective. Selling investments to provide the cash may have unforeseen ramifications that you don’t immediately appreciate. Here some wealth planning could be in order.

Home ownership is still a very British aspiration.

So while 64% of British households that own their own home is down on previous years, it remains the goal for many despite the higher hurdle to achieve it.

Once the children are established, we hear regularly about how they have benefited from the bank of mum and dad. These statements encompass the notions of “wasting money on rent” and “sense of security” – hardly a surprise given home ownership is the first step in settling down and having a family. Not everyone views property purely as an investment.

At Nedbank Private Wealth, we help many families across generations, working with you and your family to help with the right solution.

We can lend in sterling, euro or US dollars, and although any property used as security must be based in the UK, Isle of Man or Channel Islands, the ultimate property doesn’t have to be. To find out more about our tailored support for clients to borrow, please contact your private banker or our client services team.

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NAMED BEST BOUTIQUE PRIVATE BANK AT THE WEALTHBRIEFING MENA REGION AWARDS 2019 This year’s WealthBriefing MENA Region Awards were held at Dubai’s Dusit Thani Hotel in November and, at a ceremony attended by the industry’s great and good, we were delighted to pick up the award for ‘Best Boutique Private Bank’.

This latest award will sit on the shelf with our other recent awards from WealthBriefing in the MENA region. These include the 2018 and 2017 awards for Innovative Client Solution and the award for Best Private Bank (Client Service) in 2016.

The WealthBriefing MENA Region Awards are decided by a panel of private banking peers and wealth management’s trusted advisers and consultants, with the editorial team at WealthBriefing selecting the final winners from the shortlists. The awards provide an independent endorsement for the winners and recognise their achievements, performance and innovation.

These awards are judged on the back of submissions, which detail responses to a number of specific questions focused on the client experience. The watchwords of the judging process are independence, integrity and genuine insight.

The evening saw Chris Jones, Daniel Roberts, Elliott Prescott and Greg Smith pick up the award on behalf of the team. We believe this recognition acknowledges our ongoing commitment to exceptional and bespoke service to clients and further strengthens our reputation in the region.

In the words of one of the judges, we were noted for providing a “truly targeted and individualised service”.

Greg Smith, Daniel Roberts, Elliott Prescott and Chris Jones from the Dubai team

This publication does not constitute an invitation or inducement to buy or sell any investments, nor does it constitute any advice or personal recommendation. The value of investments and the income from them can fall, as well as rise and you might not get back the original amount invested. Exchange rates may affect the value of investments. Past performance is not necessarily a guide to future performance. Nedbank Private Wealth and Nedgroup Trust do not provide tax advice. We always recommend that you seek specialist tax advice to suit your individual circumstances. The opinions in Opportunity are those held by the authors at the time of printing. All data herein is sourced from local exchanges via Reuters, Bloomberg and other vendors. The information herein has been obtained from public sources believed to be reliable. Nedbank Private Wealth makes no representation as to the accuracy or completeness of such information. Should you no longer wish to receive this publication or any information about Nedbank Private Wealth’s products and services, please advise us in writing. Also, should you no longer wish to receive information about our group companies’ products and services, please advise us in writing.

Nedbank Private Wealth is a registered trade name of Nedbank Private Wealth Limited. The parent of Nedbank Private Wealth Limited is Nedbank Group Limited, which is incorporated in South Africa and is regulated by the South African Reserve Bank. The latest audited report and accounts, and details of the credit rating are available at www.nedbankprivatewealth.com. Nedbank Private Wealth Limited is licensed by the Isle of Man Financial Services Authority and is a participant in the Isle of Man Depositors’ Compensation Scheme as set out in the Compensation of Depositors Regulations 2010. For full details, please see www.iomfsa.im. Registered office: St Mary’s Court 20 Hill Street Douglas Isle of Man. The Jersey branch is regulated by the Jersey Financial Services Commission and is a participant in the Jersey Banking Depositor Compensation Scheme. See www.gov.je/dcs for full details of the Scheme and banking groups covered. The London branch is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registration No: 313189. Your eligible deposits with Nedbank Private Wealth Limited, London branch, are protected up to a total of £85,000 by the Financial Services Compensation Scheme, the UK’s deposit guarantee scheme. Any deposits you hold above the £85,000 limit are unlikely to be covered. Please ask for further information or visit www.fscs.org.uk. UAE representative office in Dubai licensed by Central Bank of UAE. Licence No. 13/191/2013. Representation in South Africa is through Nedbank Limited. Registered in South Africa with Registration No 1951/000009/06, an authorised financial services and registered credit provider (NCRCP16).

Nedbank Private Wealth Limited is licensed by the Financial Conduct Authority to provide regulated mortgages in the UK.