The MAM Blog – Greenwashing


Alan Brown – Trainee Investment Manager

Environmental, social and governance (ESG) themed funds have emerged to a point of real prominence following the Covid-19 pandemic, as a plethora of retail investors have looked to add many of the heavily marketed funds to their portfolios. Funds saturated with buzz words like: responsible, organic, renewable, sustainable, green this and green that, have appeared from just about every investment management company in the UK. Significant questions remain surrounding the actual environmental impact of such funds as was recently admitted by Tariq Fancy, former head of Blackrock’s sustainable finance arm.

Responsible investing is nothing new and there are a number of long-standing funds with respectable performance track records within the field. This focus on the impact that investments have on the wider world is also not necessarily unique to ESG funds, with a large proportion of fund managers incorporating ESG considerations into their investment methodologies. However, the majority of the reporting of the environmental impact of investments is not standardized and is often not independently verified; leading to the risks of so called ‘green washing’.

The term ‘green washing’ was first devised by the American environmentalist Jay Westerveld, in his 1986 essay reviewing the practices of the hotel industry. His research into the hotel sector lead him to discover the industry was falsely promoting the re-use of towels as an environmental strategy, when in fact this approach was adopted as a cost saving exercise. Within the context of investment, ‘green washing’ is the practice of a company whereby misleading environmental claims are made for marketing purposes. The intention is to improve the reputation of the company, in order to attract environmentally and socially aware consumers and investors, and, ultimately to boost profits. Often there will be no material positive environmental impact.

This issue was highlighted recently by the allegations that the German asset management firm, DWS Group, exaggerated claims over sustainability focused investment. This followed on the back of claims from the company’s former global head of sustainability that the firm had made misleading statements in its 2020 annual report; stating that more than half of its $900bn assets under management were invested using ESG criteria. As news of the allegations emerged, DWS’s share price suffered a greater than 13% fall in the share price reflecting significant question about the company’s operations.

This is of course, not endemic of the market at large, as many organisations have capitalised on the growing demand for ESG products by improving their environmental and social performances. It does however pose a risk to investors, one which ESG fund managers argue their expertise in the field can mitigate, to an extent. Therein lies the challenge; to accurately assess a company’s actions and impact on the environment and society as a whole. Being able to do this will allow investors to make informed decisions when investing in both companies and funds. An essential component to progress on this front will be the standardisation of a form of ESG reporting for companies and the funds holding these companies. Such a standard, if independently reviewed, would allow for like-for-like comparisons, the means to assess improvements/deteriorations and a greater level of transparency within the market. There is no doubt that the establishment of an arbiter of industry standards, perhaps in a similar vein to the bond rating agencies, is a significant challenge with a multitude of barriers to overcome. Projects such as the United Nation Principles of Responsible Investment, for one, have shown that many organisations are willing to publicly demonstrate their commitments to investing responsibly. With over 3,800 signatories representing over $121 trillion dollars of assets under management, this is definitely a step in the right direction.

The MAM Blog – Bitcoin


Simon Lloyd – Chief Investment Officer

These days, you would be hard-pressed to find anyone who had not heard of Bitcoin. Given it is one of the most controversial investments in the market today, I would like to offer some brief thoughts on the matter.

Bitcoin is an example of a ‘cryptocurrency’ which is used and exchanged digitally as a decentralized form of money. Cryptocurrencies use ‘blockchain’ technology, which forms secure public ledgers that allow for the safe transfer and ownership of assets. Bitcoin is widely considered to be the first and most-refined user of blockchain technology, and may be called the ‘market-leader’ in its field.

Since its launch in 2009, Bitcoin’s price has skyrocketed from a fraction of a penny to over £24,110 at the time of writing, making it one of the most remarkable investments in the last decade.

The main thesis for Bitcoin advocates is that it provides a secure, non-paper currency that protects against the unprecedented levels of money printing initiated by centralized governments. The opposing view is that Bitcoin is a highly speculative investment fueled by irrational behaviors driven by the fear of missing out, explained by the ‘Greater Fools Theory’ – investors buy only with the expectation that the price will rise further and the investment can be sold on. In this theory, the price inevitably crashes as its true value comes to light.

The difficulty in estimating Bitcoin’s true value is that it essentially has no intrinsic worth, that is to say its value is solely determined by what people think it should be. It could be argued that fiat (ie paper) currencies face the same dilemma, however they tend to be on slightly better footing – by the very essence of being backed by a government which can collect tax revenues.

It is important to note that Bitcoin is, objectively, extremely volatile. It is not uncommon to see price movements in excess of 10% in any given day, and even drawdowns up to 80% of its value over a longer period. Even if one is comfortable with this level of risk, investors need to be conscious that this threatens its main thesis, which is to provide a de-centralised store of value and act as a currency.

Investors also need to be conscious that due to its anonymous-nature, Bitcoin is subject to fraud and theft, and is not recognised in the UK as legal tender (although capital gains are taxed). Individuals who invest in Bitcoin risk not being able to transfer the value back into money and have no legal recourse for theft.

One final point is bitcoin’s lack of ‘green’ credentials. The incredibly complex calculations used to maintain the distributed ledgers require immense computing power, the energy usage of which is said to be the equivalent of a small country. Much of this activity takes place in China and Russia with electricity sourced from coal-fired power stations making Bitcoin a ‘dirty’ currency.

Bitcoin is undoubtedly a complex investment with many other factors not considered in this article. As with any investment, but especially so for Bitcoin, you must carefully assess the risks before committing capital, and you should understand that the value of your investment can go down as well as up.

The MAM Blog – Tax Rates Frozen until 2026


Jamie McLaren – Financial Planning Director

Chancellor, Rishi Sunak, confirmed a number of tax freezes in his Spring Budget on 3 March 2021 in combination with the continued spending to assist with the impact of Covid-19.

There were a number of tax changes noted in the budget, but this article focuses on the following personal taxes that will be frozen from 6 April 2021 until 5 April 2026:

    • The Personal Allowance and Income Tax bands.

For Scottish taxpayers, it should be noted that whilst the Scottish Parliament has the power to set Income Tax rates and bands for the non-savings non-dividend income of Scottish taxpayers the Income Tax base, which includes the setting or changing of Income Tax reliefs and exemptions, and the tax-free Personal Allowance, remains reserved to the UK Parliament.

    • Inheritance Tax (IHT) nil rate bands.
    • Capital Gains Tax (CGT) annual exemption.
    • Pension Lifetime Allowance (LTA).

The UK Government has accumulated significant additional debt in its measures to deal with the Covid-19 pandemic and it is expected to take many years to recover this expenditure. Whilst freezing tax rates may on the face-of-things seem a relatively innocuous gesture, the impact will gradually increase overall tax paid without the UK Government appearing to be overly harsh or expressly increasing taxes. This approach is often referred to as ‘stealth tax’ as there have been no express or direct increases to taxation.

For example, any inflationary increases in individuals’ salaries over this five-year period will result in more of their salaries being taxed at higher income tax rates.

It is estimated that some 1.3 million people can expect to begin paying some income tax where they did not before. A further 1 million individuals are expected to become Higher Rate taxpayers by 2026.

The freezing of the pensions LTA, CGT exemption and IHT nil rate bands will not impact as many individuals as with freezing Income Tax, but the impact of the freeze is similar to that above, determined by the growth of the underlying assets subject to assessment for these taxes.

For example, if the value of pensions, investments and property do not grow significantly over the next five years, then the freezing of these taxes/exemptions will have a minimal impact on our pockets or the Treasury. Conversely, if invested funds and house prices do well over the next five years, we may see many more people being subject to these taxes as the thresholds have been frozen. Individuals already dealing with the potential of LTA, CGT and IHT taxation may find that these freezes have increased the likelihood and degree of such taxation even further.

You can find out more about the Spring Budget 2021 by clicking here.

The MAM Blog – The Covid Vaccine Landscape


Simon Lloyd – Chief Investment Officer

At present UK investors are focussing on the outcome of the UK/EU negotiations but globally the success, or otherwise, of the Covid vaccines is likely to determine the future direction of equity markets.

The Covid vaccine landscape consists of six main candidates spread across three vaccine technologies. The two front runners are MRNA vaccines developed by Pfizer and Moderna where trials have shown high efficacy rates around 94-95% and, crucially, high effectiveness in over 65s and across ethnic backgrounds. The primary issue with the MRNA vaccines is the very low storage temperatures (Pfizer at -70OC and Moderna at -20OC) which makes distribution difficult, especially in less developed economies. The Pfizer vaccine has been approved in the UK and mass vaccinations have now started.

AstraZeneca and Johnson & Johnson are both developing Viral Vector Vaccines. AstraZeneca has published interim results with Johnson & Johnson expected to release their results early in 2021. The true efficacy rate of AstraZeneca’s double full dose vaccine trial sits at 62% and the accidental half dose trial has an efficacy rate of 90%. AstraZeneca has added a new arm to its US trials to further explore the half dose method. However, efficacy rates will likely come down from 90% as the people in the half dose group were, on average, younger than other manufacturers’ trials. Although it has a lower efficacy rate of 62%, this vaccine has the advantage that it can be stored for 6 months at 2-8O’C along with the ability to be manufactured in larger quantities compared to competition. Therefore, the AstraZeneca vaccine looks particularly promising for use in emerging and less developed markets, and because of this it remains a key contender in the vaccine race despite the lower efficacy rate.

The remaining two vaccines use an immune boosting compound called an Adjuvant to assist the body in producing neutralising antibodies. These are being developed by Novavax and the Sanofi and GSK partnership and are using already proven technologies. Both of these trials are further behind the other companies and results are likely to be released in the first quarter of 2021.

With the two Pfizer and Moderna vaccines showing no serious side effects (body aches and fatigue being the most common issues), US and EU regulators should soon follow the UK with approval for emergency use of these vaccines. This is the start of a programme of vaccination that should spread across the globe in the first six months of the coming year.

So, what does this mean for global stock markets? Despite recent lockdowns in the US and Europe over the last month markets have remained resilient overall, primarily based on optimism that widespread vaccinations will happen across the world throughout 2021. So far vaccine news has resulted in a significant bounce back from ‘value’ stocks and a slowdown in ‘growth’ stocks however, ‘growth’ remains the clear winner of the year and ‘value’ stocks are still below pre-Covid levels across most sectors. It is likely that continued positive news regarding regulatory approval and the distribution of vaccines across the world, coupled with new results from other Phase 3 trials will support markets going forward. In contrast to this optimism, the Chancellor of the Exchequer’s recent statement that the UK will not return to pre-Covid levels of activity until the end of 2022 provides a stark reminder that there are still many headwinds for global economies to navigate.

The MAM Blog – Don’t Overlook The UK State Pension


Jamie McLaren – Financial Planning Director

Don’t Overlook The UK State Pension

The UK State Pension is paid by the UK Government once an individual has reached their State Pension age. It is a regular income usually paid every four weeks and once in payment, will continue for life. This article focuses on those individuals who have not yet reached their State Pension age.

The value of the ‘full’ entitlement is set at £9,141 p.a. for 2020/21 but before and once in payment, the entitlement increases by the higher of price inflation (Consumer Price Index), average earnings inflation or 2.5% p.a. (these measures are collectively known as the ‘Triple Lock’). While you can defer drawing the State Pension, you are unable to draw it before reaching the State Pension age (SPA).

The Triple Lock has helped increase the ‘real’ value of the State Pension over recent years. However, it has been acknowledged that the generous increase has been at considerable cost to the UK taxpayer and so the Triple Lock is not expected to last indefinitely.

The UK Government has confirmed an increase of 2.5% as of 6 April 2021 (for the 2021/22 tax year), increasing the sum payable to £9,370 p.a. (approximately £180 a week).

However, the State Pension age has also increased over the years, to the point where individuals currently under the age of 60 years will need to wait until they are at least 67 years before it becomes payable.

Even though it may not be payable until individuals reach 67 years, the UK State Pension is still a very valuable source of funds in retirement. It is intended to form a foundation of retirement income which can take the pressure off withdrawals from other pension/non-pension arrangements and, as it is a defined income, is guaranteed for life.

You are not automatically entitled to the full State Pension. An individual’s entitlement depends on their National Insurance (NI) record. The State Pension was changed on 6 April 2016 to a new ‘single-tier’ system and accrual after this date would require 35 years of qualifying NI contributions or credits. NI is paid naturally via employment (so long as earnings are above £6,240 in 2020/21) and via self-employment (so long as Class 2 NI contributions are paid). You can also increase your State Pension entitlement via NI credits when not working (e.g. via certain State benefits). If still short of the full entitlement, individuals can choose to pay voluntary NI contributions to top up their entitlement.

There was a conversion of State Pension benefits accrued before 6 April 2016 and so some individuals may require more than the 35 years (with others requiring less).

State Pension entitlement is assessed as part of the Murray Asset Management annual Financial Planning review.

You can find out your State Pension age using the gov.uk calculator.

The MAM Blog – US Presidential Election Results


Simon Lloyd – Chief Investment Officer

The year 2020 has been as unprecedented as it has been unusual. As the world continues to grapple with the Covid-19 Pandemic. Governments, companies and individuals have been forced to come to terms with the so called, new normal. With the backdrop of a global pandemic, this year’s US Presidential Election has been no less tumultuous. With the sitting Republican President, Donald Trump looking to secure a second term, in the face of the Democratic nominee, former Vice President Joe Biden. The last few weeks of the campaign saw pollsters forecasting a convincing Democratic win; with some going as far to predict a “Blue Wave”, whereby the Democrats win the White House and both houses of Congress.

This prediction has proven to be inaccurate. As Biden’s hopes of an early, decisive victory were shattered late Tuesday, November third, as President Trump won the key battlegrounds states of Florida, Ohio and Texas. Neither candidate has been able to secure an absolute majority of electoral votes, 270 or more, required to win the Presidency. The election results hang on a knife edge, as millions of postal votes- continue to be counted and President Trump makes claims of foul play.

The preliminary Congressional results indicate the Republican party may marginally win both the Senate and the House elections, resulting in relatively conservative fiscal policies, regardless of who occupies the White House. In the case of a Biden win, he would face significant Congressional opposition to any significant budgetary or regulatory changes. This would pose headwinds to his ambitious agenda, including; doubling the tax rate on capital gains for high earners, investing trillions in green infrastructure and expanding a government-backed alternative to private health insurance. Were Trump to retain the presidency, it is difficult to say what impact a marginal hold on Congress will have, given the lack of clarity surrounding his polices for his second term. The President has failed to set clear policies, instead favouring vague of rhetoric such as “Create 10 Million New Jobs in 10 Months”.

From the perspective of a UK investor, this uncertainty will result in higher volatility in not only US holdings but across a wide range of related markets. Prospects of a streamlined US/UK trade deal under the Trump Administration, may not materialise with the more European focused, Biden. Where there is uncertainty there is volatility, and the market will continue to react to the evolving picture.

Ultimately, regardless of the final outcome of the Presidential Election, the winner will face significant barriers to implementing meaningful change. So, business as usual in the US.

The MAM Blog – Extra care against scammers in these times


Lisa Hamer – Compliance Director

As if it’s not enough that the Coronavirus has had a sweeping impact on us all in one form or another, there are always disreputable people (scammers, fraudsters) looking in such periods of uncertainty to prey on our fears and insecurities to make money.

Whether this is by setting up fake websites to sell face masks, hand sanitiser or gloves or pretending to be in one ‘trustworthy’ guise or another to steal from us.

Nowadays, scammers are increasingly sophisticated, opportunistic and will try to get personal details or money from us in many ways. In the current climate, with many more people being at home and wishing to protect themselves or their assets, the opportunity for scammers has increased significantly.

What should we look out for?
The Financial Conduct Authority has published to following examples of current scams on its website:

• Exploiting short-term financial concerns, scammers may ask you pay an upfront fee when applying for a loan or credit that you never get. This is known as loan fee fraud or advance fee fraud.
• ‘Good cause’ scams. This is where investment is sought for good causes such as the production of sanitiser, manufacture of personal protection equipment (PPE) or new drugs to treat coronavirus – with scammers using the promise of high returns to entice consumers.
• Using the uncertainty around stockmarkets, scammers may advise you to invest or transfer existing investments into high return (and high risk) investments.
• Clone firms – firms must be authorised by the PRA and/or FCA to sell, promote, or advise on the sale of financial products. Some scammers will claim to represent authorised firms to appear genuine. In particular, be aware of life insurance firms that may be cloned.
• Scammers may contact you claiming to be from a Claims Management Company (CMC), insurance company or your credit card provider. They may say they can help you recuperate losses by submitting a claim, for the cost of a holiday or event such as a wedding cancelled due to coronavirus. They will ask you to send them some money or your bank details.
• Cold calls, emails, texts or WhatsApp messages stating that your bank is in trouble due to the coronavirus crisis, and pushing you to transfer your money to a new bank with alternative banking details.

All of the above prey upon our normal fears or disappointments during these unprecedented times and we should all be very aware of that.

How to protect yourself
• Use the Financial Services Register and Warning List on the FCAs website to check who you are dealing with.
• Reject offers that come out of the blue, where you have never contacted the person calling you.
• Beware of adverts on social media channels and paid for/sponsored adverts online.
• Do not click links or open emails from senders you don’t already know.
• Avoid being rushed or pressured into making a decision.
• If a firm calls you unexpectedly, use the contact details on the Register to check that you’re dealing with the genuine firm. Call them back on the number detailed in the register, not on any number the caller has provided.
• Do not give out personal details (bank details, address, existing insurance/pensions/investment details).
• Look carefully at the full email address of the sender and consider whether it looks ‘right’

You can report the firm or scam to the FCA by contacting its Consumer Helpline on 0800 111 6768 or using the reporting form on the FCA website.

It is shameful that individuals will prey on our fears and losses at any time; by being extra vigilant and ending any contact if we are at all unsure, we can cut these scams off before they succeed.

The MAM Blog – A Dearth of Dividends

Murray Asset Management – Investment Management Team

For many investors, an important part of investing in the stock market is the generation of income. That’s usually available in two forms: the investment manager can sell some of your investments and send the proceeds to your bank. Alternatively, they can choose investments for you that generate an income by way of interest or dividends. The difference between the two is that a share, once sold, won’t give you that income stream anymore; while dividends usually continue to be paid over time.

Until now.

In the past few weeks, many companies in the stock market have announced that they are cancelling or suspending payment of dividends. That’s mostly for one of two reasons – either the Board are simply being prudent, husbanding their resources in the face of some short-term unquantifiable challenges; or it may be political. If a company has to accept government support in furloughing staff or taking emergency loans, they’re unlikely to want to be seen handing over cash to shareholders, no matter how badly the shareholders need it. This is causing problems for some investors.

Different shares, trusts and funds are reacting in different ways – some are continuing to pay, others aren’t. Some investors may be able to withstand these pressures, at least in the short term. Where the regular income stream from a portfolio is important, though, some changes might need to be made to the investments in order to achieve that goal.

What is also important, though, is for the manager to be aware of any change to the investor’s personal circumstances. We are all living very different lives compared to only a few weeks ago; for some people, that has meant that earned income has fallen or disappeared altogether, while for others the income streams are largely unchanged and it is outgoings such as travel costs which have come to a halt. Where portfolio income has become a greater priority, it is important to make sure that the manager is aware so that options can be reviewed and changes made, where possible.

The communication may need to be made at a suitable social distance, but it is well worth getting in touch.

The MAM Blog – The New Annual Allowance Taper


Jamie McLaren – Financial Planner

The Chancellor’s Budget of 11 March 2020 contained a few notable changes to personal taxation in a budget where additional spending to deal with the COVID-19 pandemic dominated the headlines.

This post will focus on the changes made to the Annual Allowance taper which were made to curtail tax charges applied to NHS staff based on their pension accrual. The change will, however, benefit many other high earners, while restricting the highest earners even further.

What is the Annual Allowance?

The Annual Allowance (AA) restricts the amount that can be contributed to a pension in a given tax year, while still receiving tax relief. This is currently set at £40,000 p.a. but there are a number of other factors to consider:

• It is possible to carry forward any unused AA from the previous three tax years. The AA in the current tax year is used first, then any AA from the earliest year.
• The AA can be tapered down for high earners and this is explained in greater detail in the next section.
• An individual is entitled to make personal pension contributions up to the level of ‘relevant earnings’ – being profits or salary, but even where there is none, it is possible to make contributions of £3,600, as this is the de minimis set in legislation.
• Pension contributions cannot be made beyond the age of 75.
• Once taxable income is drawn from any pension the Money Purchase Annual Allowance (MPAA) is triggered restricting the future contributions to £4,000 p.a.

Tapering of the Annual Allowance

Previously, the AA was reduced from £40,000 (down to a minimum of £10,000) by £1 for every £2 of income above £150,000 (i.e. anyone with income in excess of £210,000 will have a tapered AA of £10,000). A situation may also arise where individuals earning between £110,000 and £150,000 may also see their AA tapered.

This resulted in many higher earning NHS staff being penalised via an AA tax charge for working normal contractual hours, leading to some staff reducing hours while others retired early, putting added pressure on NHS staff resources.

The New Annual Allowance Taper

As of 6 April 2020 (i.e. for the 2020/21 tax year) the taper threshold was increased by £90,000. This means only those with incomes over £240,000 (or £200,000 for certain individuals) would be subject to the AA taper.

Following the change, approximately 250,000 UK individuals will no longer be impacted by the AA taper – many of those being NHS staff, as intended.

The change to the AA taper was not, however, positive news for all higher earners. While the taper threshold was increased, the minimum tapered AA of £10,000 was decreased to a new minimum of £4,000. Anyone with income in excess of £312,000 (or £272,000 for certain individuals) will, therefore, have an AA of only £4,000.

The HMRC policy paper on the change can be found here.