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Wealth Management

DELIVERING WORLD-CLASS SUSTAINABLE BUILDINGS

By Mark McLoughlin, Siemens Industries and Markets

 

With mounting public pressure and increasing legislation placed on businesses to reduce their carbon footprints commercial building operators are looking for more creative options to help them reach their sustainability goals.

 

To help fast track energy improvement projects many go the route of Energy Performance Contracting (EPC) and invite energy service companies in to develop, design, build and potentially, finance energy-saving projects.  EPCs are sold on the premise of zero-upfront costs with the savings made on energy consumption offset by the cost of installing any conservation measures.  Limited access to funds or expertise often stifle projects at an early stage but EPCs can unlock cash reserves for improvement programmes.  EPC use has been growing and numerous projects have been successfully delivered across a range of building types and sectors.  There is growing interest among retail, industrial, airports and other markets across both public and private sectors.

 

Ageing buildings in both the public and private sector, either through fabric or design, waste significant amounts of money.  Typically, 46% of an organisation’s operating costs is spent on energy and utilities with approximately 33% of that expended on wasted-energy.

 

To start the process of improving energy performance a comprehensive audit about an organisation’s consumption is undertaken to provide the insight to help plan the modernisation works.  Good quality information, listing any historical or future issues, forms the bedrock of planning.  Certain buildings may have known problems that aren’t apparent during a site visit i.e. excessive heating or cooling faults that are only present at certain times of the day or year.  Knowing these peculiarities provides the opportunity to factor in measures to improve comfort levels for occupants etc.  Altering the use of a building in the future would also affect a project such as the planned transfer of people or machinery to area building a year or so down the line.

 

Existing energy and water usage also play a critical part in the analysis stage.  Data, stretching back a number of years, will help in developing a robust business case that would include an outline of the conservation measures, costs and quantifiable savings and energy consumption expected.  Key performance targets could be set for minimum payback periods [e.g. 10, 15 or 20 years], compensating for inflation or loan interest/charges, CO2 savings or the generation of renewable energy sources.  An Investment Grade Plan (IGP) takes the EPC onto the next stage and provides the necessary groundwork to add more detail to the plan.

 

To ensure an EPC a business has signed up to is effectively delivering the energy savings expected measurement and verification takes place .  Generated energy is relatively straightforward to measure but energy reduction can be much harder to both quantify and control.  If there was a particularly harsh winter or hotter-than-average summer then this would greatly affect the demand for both gas and electricity in air-conditioned buildings.  Ongoing calculations within the EPC would need to compensate for any seasonal changes.  Additionally, more advanced metering may have to be deployed to gain a better picture of the savings.

 

EPCs provide businesses with access to the newest technologies and expertise across the entire spectrum of energy management.  ISO 9001: 2008 accredited improvements include HVAC and lighting management, renewable or storage energy opportunities, retrofit and upgrade/replacement, smart IoT deployments to energy purchasing strategies and water efficiency measures.

 

The UK is already legally bound by the Climate Change Act to reduce emissions 80% by 2050 and with energy costs forecast to rise over the coming years anything organisations can do to reduce usage is going to have a positive impact on their finances.  EPCs are an option that many businesses should consider.  Not only will businesses help the environment but they will also help deliver sustainable environments built for future generations.

 

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Wealth Management

WHAT TO DO WITH YOUR LIFE SAVINGS, RETIREMENT AND INSURANCE POLICIES WHEN EMIGRATING

Insurance

By Renier Hugo, Alexander Forbes Certified Financial Planner

 

With South Africans increasingly opting to live abroad, a hot topic is the issue of what to do with your life savings, retirement, and insurance policies when emigrating.

New legislation, coming into effect in March 2020, means that South African tax residents living and working abroad will be required to consider whether they should emigrate from South Africa in order to avoid having to potentially account for tax in two countries.

A new term known as “financial emigration” has crept into people’s vocabulary. This is no different from the term “emigration” and the rules which attach when a person takes the steps to emigrate.  One needs to understand the consequences of emigrating to another country on one’s financial products, such as long-term insurance policies, investments and pre-retirement money.

 

Insurance

Renier Hugo

Life cover – You have the option of cancelling your life cover. Depending on the policy of the particular insurer, you might have the right to continue with the cover depending on whether the risk has changed for the insurer. You should take advice on this aspect. If you can it might be worthwhile to keep the current cover especially if you were underwritten when much younger or healthier. Your premiums will still have to be paid from a South African bank account.  Some South African insurers currently sell life insurance that pays out in dollar or pounds; or life policies that pay out in any country abroad. These products may well be worth looking into before emigrating.

 

Disability and Income Protection – Care must be taken here. Assuming the policy can be continued, there may be certain exclusions within the terms and conditions when moving abroad.

 

Retirement Annuities  The usual restrictions of not being allowed to withdraw before age 55, as well as the one third maximum cash lump sum withdrawal, with the rest to buy a pension, does not apply. When officially emigrating, a member of an RA may withdraw the full capital amount.

 

Preservation Funds –  The same applies to members of pension and provident preservation funds – a full withdrawal is allowed upon emigration.

 

Employer pension or provident funds – there is no restriction on withdrawal out of an employer pension or provident fund if a person decides to emigrate before normal retirement age.

 

Unit trusts and shares – regardless of whether you make the financial decision to sell these, there will be a tax consequence on emigrationso it is important to take advice.

 

Living Annuities –  With regards to living annuities, you are unable to withdraw the capital even if you have formally emigrated. The income will continue to be paid out into a South African bank account, and from there the annuitant can choose to transfer it offshore.

Before making the big move abroad it is always wise to consult your financial adviser, as well as a South African emigration specialist who can analyse and give advice on your unique and personal circumstances. One should also obtain tax advice to understand the tax treatment of financial products following emigration.

 

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Wealth Management

THE END OF YEAR TAX CHECKS THAT COULD SAVE YOU THOUSANDS

Tax

Charlie Reading, Founder and MD of Efficient Portfolio

After HMRC’s tax return deadline at the end of January, it can be tempting to drop your guard, believing that your new tax bill is a long way away.

It’s true, you’ve got a whole year until the next bill is due. What most don’t consider, however, is that there is a range of checks that you can do reduce that bill significantly.

Astute investors make use of their tax-free allowances every year and save thousands of pounds in the process. With such massive savings on the line, it’s a strategy to certainly consider.

With that, here are some easy checks and tips from Charlie Reading, Founder and Managing Director of Efficient Portfolio chartered financial planners, that could start you on your way to a much leaner tax bill:

 

Tax

Charlie Reading

1. Maximise Your ISA Allowances

Good returns, flexibility, diversity and tax efficiency should be key components in your financial strategy, and the ISA helps to deliver all of these. Historically, ISAs have been at the cornerstone of tax-efficient saving and are often referred to as one of the essential steps in your strategy, as they can help your wealth grow without you being penalised by heavy tax charges. They are an incredibly useful way of saving, and, as such, it is generally encouraged that people take advantage of their benefits. However, the ISA allowance is offered on a ‘use it or lose it’ basis, so if you fail to maximise it, you can’t make up the funds later on.

Up until 5th April 2020, you can contribute up to £20,000 into an ISA, and a further £20,000 from 6th April 2020, thereby sheltering up to £40,000 per person, as long as you’re over 18.

 

2. Top Up Your Pension While You Still Can

At the time of writing, the highest level of State Pension you can receive is £129.20 a week, which is frankly a paltry sum to live on. That’s why saving for the future is so important. It might seem wise to enjoy life now and worry about retirement later, but you’d only be damaging your future quality of life.

Pensions are a highly tax-efficient way of saving and now offer a great deal of flexibility in retirement, as when you retire you can gain access to 25% of your pension pot as a tax-free lump sum, with the remainder taxed at your marginal rate.

The current pension annual allowance is set at £40,000, so if saving for your future is a priority, it is worth investigating which pension is right for you, sooner rather than later.

 

3. Protect Your Estate from Tax

Inheritance Tax (IHT) is a concern for people from all walks of life. If you are hoping to leave a legacy to your loved ones, the last thing you would want is for that legacy to be taxed at 40% and lost to the Government.

One simple way of combatting this is to consider using your annual IHT allowance. During your life, you are allowed to give away £3,000 per year without incurring any IHT charges upon your death. There are of course downsides to this, in that you lose all access and control over the money, but it may be a tax-efficient strategy to consider.

 

4. Don’t Overpay Your Capital Gains Tax

The final tax consideration at this time of year is Capital Gains Tax, which is also given on a ‘use it or lose it’ basis and is currently set at £12,000. The issue of Capital Gains Tax is most acute if you hold investments which have grown above your tax-free allowance.

To ensure you make the most of your Capital Gains Allowance, it is generally recommended to sell down a portion of your portfolio to realise the growth made, but only enough to maximise your allowance, is the most prudent strategy.

These funds can then be used to fund any outstanding allowance on your ISA, for example. The advantage of doing so is that by placing your money from a taxable to non-taxable environment you have the potential for further growth, and you benefit in the longer term by potentially reducing a future bill.

There’s plenty of time left before the taxman comes knocking once again, but there’s no better time than the present to start looking into how you can save you and your business thousands of pounds simply through tax allowances you might not have previously been aware of.

 

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