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Which? survey reveals worrying trend

Tuesday 23 April 2013

In a recent Which? investigation, some of the UK’s biggest banks were identified as failing to give the right advice when it comes to transferring and managing their Cash ISAs.

In the investigation, Which? placed 180 calls to 15 leading banks and building societies to assess the quality of advice given to people who want to transfer their Cash ISA savings. The same three questions were asked in each conversation with a Bank Advisor:

  • How do I transfer my cash ISA?
  • Are there any rules about how much I can transfer?
  • Can I transfer to a stocks and shares ISA?

In just 16 of the 180 calls Which? enquirers made, the bank advisors gave correct answers to all the three questions asked.

Big name banks such as HSBC, Yorkshire Bank, Royal Bank of Scotland (RBS), First Direct and Barclays failed to give correct answers to the three ‘simple’ (Which?) Cash Isa questions in more than 50% of the calls that were made. In the percentage of Bank Advisors who answered the three questions correctly, the top three were at National Savings & Investments (NS&I) – 72%; Santander – 71% and the Co-operative Bank – 66%.

The bottom scoring three banks were Royal Bank of Scotland (RBS) – 44%; Yorkshire Bank – 35% and HSBC – 33%. HSBC scored particularly badly when asked if there were any rules about how much you can transfer – one provider incorrectly told Which? that you had to transfer a minimum of £10,000.

Yorkshire Bank scored just 8% when asked the same question. Worryingly, in six out of the 12 calls made to the Yorkshire Bank, the investigators were given the incorrect ISA limit, with answers ranging between £5,340 and £5,620 (the correct answer is £5,640 for the 2012/13 tax year) and one  Yorkshire Bank advisor said that there was no limit at all!

RBS, which finished third from bottom in the Which investigation, told one of the researchers who asked about transferring a Cash ISA, that all he needed to do was ‘just withdraw your funds, close the account down and transfer it over to somebody.’

If you are worried about the advice you may be receiving, then contact one of the team who will be happy to help.


Financial Mis-Selling: Has Anything Really Changed?

Tuesday 23 April 2013

In 1720 hundreds of people were ruined when the ‘South Sea Bubble’ collapsed. The share price of the South Sea Company had been inflated to ridiculous levels by insider trading: bribes were paid to politicians, some people got rich, far more were ruined and considerable damage was done to the national economy.

That was nearly three hundred years ago and you might argue that very little has changed in the intervening years. Both the 19th and 20th centuries saw their fair share of financial scandals as those “in the know” sought to get rich quick at the expense of those who wanted to be in the know.

Is it any better now? Maybe we no longer have the colourful corporate scandals and frauds of earlier years – but the banks and building societies have just set aside £14bn to cover the mis-selling of Payment Protection Insurance. You have to wonder if the aim has changed from taking a lot of money off a few suckers – to making suckers of us all.

With the PPI scandal following hard on the heels of endowment mis-selling there’s little wonder that people are becoming sceptical about financial advice. Is it in their best interests? Or is in the interest of the people giving the advice and the targets they need to meet?

According to the latest figures, around 34m PPI policies have been sold since 2001, generally with the intention of ‘protecting your payments’ on a loan. The theory was simple: if you couldn’t make your repayments through accident, sickness or unemployment then the payment protection policy would come to the rescue and make the repayments on your behalf.

But what if you were in a job in the public sector where – barring a huge indiscretion – you were almost guaranteed a job for life? What if you were self-employed and simply couldn’t be made redundant? What if the terms of your employment meant that you still received full pay in the event of accident or sickness?

Sadly, it didn’t matter. Sign here, all included in your monthly payment and you really needed that loan didn’t you? And that’s how we came to £14bn being set aside for compensation and thousands of banking staff working on processing the mis-selling claims.

As an adviser, it’s easy to be smug. The trouble is that mis-selling scandals like this damage everyone in the financial services industry. Clients become suspicious, which means that they are sometimes reluctant to take action which is necessary or advisable.

That’s why we welcomed the Retail Distribution Review and the regulatory changes which came in at the beginning of this year, including the greater professionalism required from everyone in the industry. We’re fiercely proud of our independence, we’ll continue to pursue the very highest standards of professional development and we’ll always give our clients advice which is in their very best interests.

Does all this mean that mis-selling scandals will be a thing of the past? Sadly, it probably doesn’t. There is now a lot of talk in the media about possible mis-selling by the energy companies. Why does an energy company need five or six different tariffs? Surely gas and electricity are just…well, gas and electricity. Let’s see how that one develops.

In the meantime there are three pieces of advice we can offer which will hopefully see you avoid any potential mis-selling scandals in the future. Not surprisingly, the first two have been around for a very long time!

  • If something seems too good to be true it almost certainly is too good to be true
  • If you don’t understand something then you probably shouldn’t do it – irrespective of how persuasive the nice young man across the desk is
  • Finally, talk to us. We’re always here to answer your questions: if there’s some aspect of your financial planning that’s worrying you, pick up the phone and speak to us.

Dont Fall into the Inflation Trap as you get Older

Tuesday 23 April 2013

Earlier this month, the Office for National Statistics updated the ‘national shopping basket’ – the national basket of goods that the ONS uses to monitor rising prices. The big news for the headline writers was that ‘Champagne was out; e-books were in,’ as a nation struggling with the recession stopped celebrating and started reading books at 99p.

It’s easy to be flippant about the basket of goods, but the measurement of inflation is a serious business with serious implications – particularly for the UK’s older people.

That might surprise you. Surely the rate of inflation is the same for everyone? Yes, the Government announces a single rate of inflation across the country – but rising prices impact differently on different age groups. And the general rule is that the older you are, the more you are affected by inflation.

Clearly if you are living on a fixed income (one that doesn’t rise with the cost of living) then inflation is going to be very bad news. But even if your income does increase, the elderly will often find that their spending power is gradually decreasing.

The Government recently switched to using the Consumer Price Index (CPI) as the reference point for increasing the state pension and index linked pensions. This move away from the Retail Prices Index (RPI) immediately took a slice out of people’s spending power – simply put, the RPI increases at a faster rate than the CPI.

According to figures from Saga, someone who was receiving a £10,000 per annum pension in 2010 would have seen this rise to £10,846 in 2012, using the CPI – but had RPI been used, then the figure would have been £11,046. A difference of £200 may not seem much – after all, it’s only £4 a week – but imagine that difference compounded over 15 or 20 years. It adds up to a significant saving for the Government, and a significant loss of purchasing power for older people.

The reason older people are more affected by inflation is simple: they spend more of their money on the items which are going up most quickly, and – unfortunately – they have little choice in how they spend the money. Typically an older person will spend far more of their income on food, fuel and energy than someone who is still working. So a cold March like the one we’re currently having will be very bad news.

In the Autumn of 2012 Saga calculated that the previous five years had seen a general increase in the cost of living of 16.8%. But for those aged between 50 and 64 the rate was 19.6% and for over-65s it was a very painful 22.8%.

So what can older people do to avoid the ‘inflation trap?’ Fortunately one of the easiest steps to take is also one of the most effective – see an independent financial adviser and make sure your finances are properly organised and regularly monitored.

A good IFA will be able to give advice on the best – and most tax efficient – way to take your pension; guide you through the maze of buying an annuity and make sure you buy the very best one available; and help you get the highest interest rate on your savings.

Advice like this can make all the difference between being comfortably off in retirement – and not having quite enough. In addition, regular reviews from an IFA will ensure that your finances stay securely on track, providing essential peace of mind.

We are always happy to talk any clients or potential clients about their finances. Simply give us a call or drop us an e-mail: we’re here to help.


The New Proposals on Long Term Care and what they mean for your Financial Planning

Monday 25 March 2013

In the Spring of last year retirement specialist LV= produced a report looking at the future of long term care in the UK. With increased life expectancy, LV= predicted that the number of people needing care – either in their own home or in specialist retirement homes – would surge by the year 2025, reaching 1.1 million, an increase of 30% on the current figure of 840,000.

With the cost of care also set to increase from the current average of £26,000 per year to a predicted £33,000, the burden on the UK economy – and hence on a decreasing proportion of taxpayers – is set to be prohibitive. How can the country afford it?

And yet… Is it fair that someone who has worked and paid taxes all their life should then have to sell their home to fund the cost of long term care?

This problem – and the apparent difficulty of squaring the circle – has clearly been known about for some time, and in 2010 the Government commissioned economist Andrew Dilnot to look into the whole issue of long term care. Essentially Dilnot was asked to find a way of protecting people’s assets against the cost of long term care – whilst at the same time ensuring that the country didn’t face an impossible bill.

Dilnot recently made his recommendations, which were accepted by Health Secretary Jeremy Hunt, ‘with some slight tweaks.’ So what are the recommendations? And what implications do they have for your long term financial planning?

The three main recommendations:

Dilnot’s first recommendation was a cap on overall care costs, so there is a limit on the total amount that anyone can pay in his or her lifetime. Dilnot had recommended that the cap be between £30,000 and £50,000: in fact the Government decided that the figure should be higher, with the cost of care capped at £75,000 during an individual’s lifetime.

The cap does not include the cost of accommodation – it is the cost of care only. So if, for example, someone was paying £700 per week for long term care, made up of £400 per week residential costs and £300 per week care costs, only the £300 would count towards the cap.

The second change is an increase in the means-tested threshold. At the moment anyone with assets in excess of £23,250 must pay towards the cost of their care. Dilnot had proposed increasing this to £100,000 but the Government have moved it still further, to £123,000. However, if your assets exceed this figure then you are not eligible for any state help until you have passed the ‘cap’ of £75,000.

It is important to note that for those people needing care at home – a substantial number – the threshold will stay at £23,250.

Finally, no-one will now need to sell their home to pay for the cost of care. This has always been an unpopular piece of legislation, and Dilnot has proposed a scheme to allow fee payment to be deferred in a person’s lifetime. This ‘universal deferred payment’ will be introduced in 2015, and will allow people to borrow against the value of their home with the estate then paying back the loan (plus as yet undecided interest) on death.

When will the changes be introduced?

In the main these changes will be introduced in 2017, apart from the universal deferred payment as described above. Until then the current rules will apply to anyone going into care.

What do they mean for your financial planning?

By and large, the changes are to be welcomed. But do they remove the need for financial planning where the costs of long term care are concerned? Far from it. The cap on costs was essential: we have long felt that it is wrong for a person to face an open-ended bill at the end of their life. Likewise the rise in the threshold – but £123,000 is only equal to the cost of a very small home, so we suspect that this move may not make a lot of practical difference.

We have some reservations about the ‘universal deferred payment,’ particularly the as yet unannounced interest rate. If it is linked to inflation (as the rate of interest on student loans is) then it could see substantial amounts of interest being paid.

We would still urge anyone who feels that they may need long term care – or who has elderly relatives who may need long term care – to talk to us about financial planning. The Dilnot proposals are welcome, but for many people – particularly high net worth clients – they may make little practical difference.

If you want to choose the quality of your long term care, and want to be certain that you will pass on as much of your estate as possible to your beneficiaries, then proper financial planning remains an absolute essential. These proposals, welcome as they are, have done nothing to change that.


The State of the UK Banks and what it means for your Financial Planning

Monday 25 March 2013

Once upon a time it was all so simple. Nothing could be safer than the UK banks. They were the cornerstone of every fund manager’s income portfolio. Do you want to build your financial planning on shares that would protect you against market fluctuations and deliver a steadily increasing dividend income? Sober, well-run, cautious businesses that the rest of the world could learn from… Look no further than the UK banking system.

And then – as we all know – the banking crisis struck.

The sober, well-run organisations turned out to be anything but: reckless loans, mismanagement, ‘casino-style’ back offices... The share prices plunged, the reliable dividends stopped dead and the UK taxpayer had to come running to the rescue. The Government was left with substantial stakes in RBS and Lloyds TSB and with plenty of commentators – wise after the event – muttering, “told you so.”

As the Spring of 2013 approaches, the taxpayer is showing a net loss of £13bn on the stake in RBS and a loss of £5bn on Lloyds TSB. Using the new 1,200 bed Queen Elizabeth Hospital in Birmingham as a comparator, that’s enough for around 30 new hospitals!

With results due out shortly, RBS and Lloyds TSB are expected to post a combined loss of £6bn. This might be a far cry from the record corporate loss of £24bn by RBS four years ago, but it is still a long way from a return to profit.

Whereas many European banks have a very close relationship with their national Governments and China sees state control of the banks as an essential part of central planning, it seems likely that Her Majesty’s Government will follow the lead of the US Government and sell its stake in the rescued banks, ideally as quickly as it can.

Most people would probably agree with that decision, as long as the taxpayer ‘gets his money back.’ However, a recent report in the Observer seemed to suggest that the sale of the stakes in RBS and Lloyds TSB may take much longer than expected.

The position of the UK banking sector therefore remains – and is likely to remain – confused. More services will undoubtedly move online: as the retail sector so sadly demonstrates, the high street is a ridiculously expensive place to do business. More new players will come into the market, unburdened by the compliance failures and vast branch networks of the established companies. So there are still plenty of changes in store: what implications does this uncertainty have for your financial planning?

If there’s one thing you need in your financial planning, it’s certainty. None of us can predict how stock markets are going to perform, but hopefully one thing you can depend on is your financial adviser.

Most people know that there have been changes in the way advice is delivered and the way in which advisers are remunerated. It’s fairly safe to say that if a firm of independent financial advisers is in business now, then it’s because they are well-run, prudently managed and have established a track record of delivering excellent service to a satisfied client bank – and that they’ll continue to deliver such a service for the foreseeable future.

A good independent financial adviser will obviously make recommendations that will help you achieve your financial planning goals. But they’ll do something much more important than that – they’ll listen. Before they make any recommendations, they’ll make sure that they understand you and understand the lifestyle you want.

They’ll also continue to work with you long after the initial recommendations have been implemented. Everyone has changes in their life and it’s important that your financial planning adapts to those changes. You can only do that if your financial adviser has a long term commitment to you – not a short term commitment to their annual bonus.

As always, we’re at the end of a phone (or an e-mail) for both new and existing clients. If you’d like to see us for a preliminary chat – or if you’re a long established client who simply wants to make sure everything is still on track – then don’t hesitate to get in touch.


Changing your will  what you need to know

Monday 25 March 2013

You have at long last got round to preparing your last Will and Testament, and that’s ‘job done’ – or is it? If you write your will earlier in your life than at the last moment, it is highly likely that you will need to update it from time to time, as things change in your life and around you.

The important thing in the end, is that your will does what you intend and that it works in a way that is not difficult to execute, nor likely to lead to confusion or complaint.

The sort of events and issues that are likely to cause a will to become outdated include divorce or the break-up of a civil partnership, when if you find a new partner, it may not now be your intention to leave everything to your previous!

Changes in family circumstances can significantly disrupt your intentions in a will, for example the death of a named beneficiary. If your assets and estate grow beyond what you anticipated in your will, you may wish to alter or add your bequests. The arrival of numbers of grandchildren later in your life, unless provided for to your satisfaction in the general terms of your will, may prompt you to re-visit, if you want to ensure that individual needs and circumstances are addressed.

You can make minor alterations to your will without the necessity of drafting a new will by using a document called a Codicil. In the case of the grandfather where the number of grandchildren has rapidly increased from two to a full football team of eleven, it would be simpler to go for a new will, rather than a growing collection of Codicil attachments. A Codicil details any changes, while also confirming the rest of the previous will document, from the date that the Codicil is added, and if a small number of changes are required it is a simpler alternative to re-writing the entire will.

By using a Codicil, any of the details in a will can be changed. Gifts can be revoked and new gifts can be added, or you can change the Executor. A Codicil always identifies the will it amends by referring to the date on which the original will was written, and must be signed in the same manner as the original will with the same number of witnesses – two in England and Wales, typically one in Scotland. A Codicil should be kept with but not attached to the original will it changes, as this ensures the Codicil is not overlooked.

It is a good idea to review and, if necessary, update your will every couple of years to ensure it is still relevant. As long as you are mentally competent, you can change, modify, update, or completely revoke your Last Will and Testament at any time.

To be safe it is always best to ask your estate planning attorney to prepare a Codicil or a new will for you so that it will be legally valid and binding on all of your beneficiaries.


The Government Overhauls the State Pension System

Thursday 14 February 2013

Given the Government’s recent introduction of Auto-Enrolment and the determination to see as many people as possible enrolled in company pension schemes, it was inevitable that they would also turn their attention to the state pension.

Pensions Minister Steve Webb has now introduced a White Paper setting out the proposed changes, which will come in from 2017 “at the earliest.” Inevitably with any change like this there will be winners and losers. Before we consider those here are the main points of the Government’s proposals:

  • From 2017 (or later) the current system of a basic pension of £107 per week plus various means-tested top-ups will be replaced by a flat-rate pension of £144 per week (in today’s money)
  • The Government believes this will be fairer to working mothers and to the self-employed
  • The Government’s figures suggest that at least half of all working people reaching state pension age before 2050 are likely to have a better outcome under the new system, by at least £2 per week
  • However, they acknowledge that by 2060 more than half of those retiring will be worse off, as they won’t have had chance to build up a state second pension

By introducing these changes the Government has probably achieved its twin aims of simplification and keeping the spiraling cost of the state pension in check. In particular Steve Webb was at pains to stress that with the state pension being much simpler, people will have a clearer idea of how much they’ll need to save themselves to provide the income they need in retirement.

Clearly the moves will benefit the self-employed and working mothers – and by and large the White Paper was welcomed by the pensions industry.

However there are also going to be losers, and many commentators were quick to highlight those in the public sector. Currently up to 7m public sector workers pay lower NI contributions in return for not getting more than the basic state pension of £107 per week. They will now need to increase their level of NI contributions – as will their employers, who have also benefited from lower contributions. The employers will need to find this money from somewhere and the finances of the public sector might be squeezed yet further.

Some higher earners – who would have qualified for a bigger pension thanks to higher NI contributions – will also miss out under the proposed changes.

These changes are due to be introduced in 2017 at the earliest and there will be a General Election before then. But, irrespective of the outcome there will be changes to the State Pension with both of the main parties acknowledging that the current system is unwieldy and potentially far more expensive then the country can afford.

The message is increasingly being driven home that the Government will provide a basic safety net in your retirement, but anything more is going to be up to you. Proper pension planning is becoming more and more important.

The first step is to find out exactly where you are now – with both your state pension and any company or occupational schemes you might have. We can help you do that and we’ll also be happy to prepare a comprehensive plan for your pension, setting out the current position with your pension – and what needs to happen for you to have exactly the retirement you want.


How to make your child a millionaire

Thursday 14 February 2013

”How to make your child a millionaire – through regular investing and using perfectly legitimate tax dodges’’ – the headline of a recent article in the Daily Mail.

Reading this article also makes it clear that we need to be well off to achieve this aim, and even more so, if we have more than one child. However, the article does usefully remind us of three basic ways by which we can deliver more modest nest eggs for our children, tailored to our means, if we start early (as soon as they are born).

The three basic steps to take, which could see a child a millionaire by their 38th birthday, make the most of Junior ISAs, cash gifts and stakeholder pensions. Not only can we build a significant inheritance for a child, our actions will at the same time have cash benefits for us.

Step one: Junior ISA – your child is eligible for a Junior ISA if they were born after 1st January 2011 or if they were ineligible for a Child Trust Fund (CTF). Junior ISAs work in much the same way as a standard ISA with parents or legal guardians able to save up to £3,600 tax free in either a cash or investment ISA each tax year. The difference is that the money cannot be withdrawn until the child reaches 18 and it is the child who has access to the funds, not the parent.

If you were able to afford the full ISA annual allowance, year-on-year, paying 3 per cent (the average rate at the moment) would see £3,600 per year, which is £300 per month, become £85,782 by the time your child becomes 18. However, you could take more risk by choosing an investment ISA, where you could see returns of more like 6 per cent, making your payments hit a total £116,205.

Step two: Gifts into an investment fund or trust – another way to boost your children’s wealth and reduce your Inheritance tax (IHT) bill at the same time, is to make cash gifts. You have to survive for seven years after you give a cash gift for it to escape the IHT net. Unlimited gifts of up to £250 a person per tax year are tax exempt, as are payments of up to £5,000 for wedding gifts. The Revenue also allows you to ‘gift’ £3,000 every year to an individual.

But what is even better is that regular gifts, of any amount of money, once made from normal income, can be exempt from IHT. You must however show that you have been giving regularly and that your standard of living has not deteriorated as a result. HM Revenue & Customs will demand details of these gifts when the giver dies. Funds or investment trusts can be a good gift option, with currently an average growth of 5 per cent per year after charges and tax.

Step three: Pension Planning – here the major boost to the fund comes from setting up a pension for your child as soon as they are born. Often parents do not realise that they can do this, but by setting up a simple stakeholder pension plan you can start tackling your child’s pension from day one and help reduce your IHT bill at the same time. Even better, your contributions to a stakeholder pension plan are topped up by the government in tax relief, so your money will go even further.

If you put the maximum allowance into a stakeholder pension every month from the year your child is born (£3,660 p.a.), again assuming 6 per cent compound growth, the pot will grow to a value of £523,278 by age 38. However, it is important to remember that while the pension will play a major part in your child’s wealth by age 38, they won’t be able to access it under current rules until they are 55.

Saving £9,840 each year for the child to the age of 18 and £5,880 each year after discontinuing the Junior ISA element, would accumulate around £1.275 million – and all before your child reaches 40. However, as most of us realise, firstly we need to be earning a lot and secondly if we have more than one child, what we do for one we have to do for the others. Nevertheless doing what we can in all three areas would seem to be eminently sensible.


Your 10 most common ISA questions answered

Friday 11 January 2013

Christmas is over for another year, which means it’s not long – hopefully – before the first signs of Spring appear and we start to turn our attention to the end of the financial year. For many investors and savers this means making sure they contribute to an Individual Savings Account (or ISA, as they’re more popularly known).

These tax efficient savings vehicles have been around since April 1999 but many clients still have queries about them. To help you understand ISAs better in the run up to end of the financial year, we’ve answered the ten questions we’re most commonly asked.

1. Exactly what is an ISA?

An ISA is a ‘wrapper’ that’s designed to go round an investment, making it more tax efficient. There are two types of ISA; cash – and stocks and shares. Cash is like a normal deposit account, except that you pay no tax on the interest you earn. A stock and shares ISA allows you to invest in equities, bonds or commercial property without paying personal tax on your returns.

2. How much can I contribute?

For the tax year ending 5th April 2013, the maximum level is £11,280 per individual (so a husband and wife could contribute £22,560). The maximum that can be contributed to a cash ISA is £5,640. But if you only contribute, say, £3,000 to your cash ISA, then you could contribute up to £8,280 to your stocks and shares ISA.

3. What are the crucial dates?

The ISA limits apply to a tax year – so the current allowance of £11,280 applies to the tax year running from 6th April 2012 to 5th April 2013. The next tax year starts on 6th April 2013 and the overall ISA limit will rise to £11,520. It’s important to note that your ISA allowance cannot be carried forward from one tax year to the next.

4. Can children have an ISA?

Yes, they can. At the age of 16 and 17 they can have a cash ISA, with the same limits as an adult. Some children – those born before September 2002 or after January 2011 – will also qualify for a Junior ISA with a limit of £3,600 per year. Children born between September 2002 and January 2011 can’t have junior ISAs: they have the Child Trust Fund.

5. Are the returns guaranteed?

Some ISA providers guarantee their interest rates on cash ISAs but the return on a stocks and shares ISA cannot be guaranteed, and you could get back less than you invested. As with all forms of investment it makes sense to take advice from an independent financial adviser, and stocks and shares ISAs should be seen as a medium to long term investment.

6. I’ve heard people say ISAs are better than pensions: is that right?

No, not necessarily. ISAs and pensions are entirely separate and both can, and do, play a part in our clients’ financial planning. Some clients prefer the simplicity of ISAs, but they don’t attract tax relief on your contributions like pensions do. The best idea is to talk to us about your long term financial goals, and we’ll discuss the advantages and disadvantages of both ISAs and pensions, and help you decide on what’s best for you.

7. My ISA was with XYZ Building Society last year. Do I have to stay with them this year?

No, absolutely not. You can have a different ISA provider every year if you so choose. For cash ISAs it obviously makes sense to choose the provider who’ll give you the best rate of return, and for a stocks & shares ISA you’ll naturally want to consider the past performance of the provider (although it’s no guarantee of the future) and the range of funds offered.

8. I have ISAs with several different providers. Can I consolidate them?

Yes, you can – and you won’t lose the tax ‘wrapper.’ Many previously attractive savings accounts cease to have a good rate of interest, and naturally some stocks and shares ISAs don’t perform as well as investors would have hoped. Consolidating your ISAs may also substantially reduce your paperwork. We’ll be happy to talk you through the advantages and disadvantages of doing it.

9. Can I save regularly in an ISA? I prefer saving on a monthly basis.

‘Yes’ is the simple answer to that question. We’ll happily advise on which providers accept monthly savings.

10. Someone mentioned ‘re-registering’ an ISA. What does that mean?

Many of our clients are now choosing to keep track of their investments via what’s known as a ‘wrap.’ Essentially this means that investments with different companies and/or investment groups are brought together under an overall ‘wrap’ for ease of administration. If an ISA is included in this type of arrangement it will need re-registering to the wrap provider. The underlying investment doesn’t change.

So there are the ten questions answered. If you’d like any further details, advice on your current or planned ISA investments or you have any other questions, then as always, don’t hesitate to contact us.


Ten New Years Resolutions for your Financial Planning

Friday 11 January 2013

Around 50% of us make New Year’s Resolutions and ‘sort the finances out’ must be one of the most popular: but that’s a little vague – it’s more a wish than a firm commitment to take action.

Looking at the January appointments we’ve had with new and existing clients, here are the topics that we’ve discussed most often. If you’re determined to sort out your finances, these may give you some food for thought.

1. Sort out the mortgage

The mortgage is the biggest monthly expense for the vast majority of people, and making sure that the rate you’re paying is competitive is basic common sense. Many people are paying a higher rate than they need to and half an hour with an IFA or independent mortgage broker can be time very well spent. Yes, there are costs involved in moving your mortgage, but these can often be outweighed by the savings to be made.

2. Sort out our life cover

This is an absolute priority, especially if you have children. Many people don’t know the answer to questions like ‘how much life cover do I need?’ ‘How much do I have?’ ‘Does it include critical illness cover?’ No-one likes to think about the possibility of being seriously ill or dying, and therefore we tend to neglect our protection policies. Life cover can be surprisingly inexpensive: and even if you do have cover in place, make sure you have it checked on a regular basis. In many cases the cost of protection is continuing to fall and it may be possible to replace old policies and increase the amount of protection you have, without increasing your premiums.

3. Start saving for the children

However much you’ve just spent on Christmas presents, your children are going to cost you a lot more in the future. Whether it’s university tuition fees, a first car, your daughter’s wedding or the deposit on a house, the numbers are only going to go one way. Even if you only save a small amount, doing it on a regular basis over a long period can make a significant difference – and with the ability to save tax efficiently through an ISA, at least the taxman will be on your side.

4. Start saving for ourselves

What’s true for the children is equally true for yourself; if there’s a specific savings target you have in mind, or whether you simply need to save for the proverbial ‘rainy day,’ the earlier you start to save the easier it is to achieve your goal.

5. Sort out my pensions from previous employment

Many people have pensions left over from previous jobs, and despite various Government initiatives aimed at simplifying the system they still don’t have an accurate idea of how much is in their pension ‘pot.’ Good pension planning is impossible without knowing the position you’re starting from, so it’s a sensible idea to talk to an IFA and find out the position with any old pension policies. For example, can they can be brought together and simplified?

6. It’s time I understood the company pension scheme

Just as importantly, far too many people don’t understand their existing company pension scheme. Is it final salary? Money purchase? Eightieths? Sixtieths? Can I make additional contributions? Buy extra years? Again, half an hour with a knowledgeable independent financial adviser will be time well spent. He’ll be able to summarise the main benefits of the scheme for you, tell you the sort of pension you’re likely to receive and advise you of the best course of action if you want to improve your pension benefits.

7. Investigate Inheritance Tax and Long Term Care

If it’s the case that your parents are elderly, then it may be worth thinking about Long Term Care planning. Similarly if their – or your – estate is likely to be subject to Inheritance Tax, then action taken now could pay significant dividends in the future. Again, an IFA will be able to tell you what’s possible, and the steps that could be taken now to prevent an unpleasant surprise in the future.

8. Look at Private Medical insurance

With tales of woe from the NHS continuing – and more economies seemingly still to be made – many people are starting to look at the option of private medical insurance. This may be an investment worth making, particularly if you run your own business and would need treatment at a time to suit you.

9. We need to sort out the partnership insurance

Many businesses are run as a partnership (whether it’s a straightforward partnership or through equal shares in a limited company). The death or serious illness of one of the partners could have catastrophic consequences for the business – and serious implications for the other partner. And yet very few businesses have addressed the simple question of partnership assurance. Your IFA will be able to explain the basic rules to you and give you an idea of what protection might cost: you may well be pleasantly surprised!

10. We need to make a will

Last – but by no means least – make sure that you have an up to date will. The consequences of dying ‘intestate’ (that is, without a will) can be severe, and with a simple will being relatively inexpensive it’s sensible to make sure that this area of your financial planning is kept up to date.

So there’s plenty to think about… If you would like to discuss any of the above points – or any other aspect of your financial planning – then as always, please don’t hesitate to contact us.


The Best Time to Sell Your Shares

Monday 17 December 2012

Despite the fact that it is more than ten years since the FTSE-100 index was at its all time high, the last decade has presented plenty of opportunities to make money by buying and selling shares.

Many of our clients are actively interested in the stock market. We’ve therefore put together what we hope are some useful pointers on perhaps the most important question of them all where shares are concerned: when is the best time to sell?

First of all, regular reviews of your share portfolio are important. We’d suggest doing this at least monthly, and there are now excellent software packages available which will help you keep track of your portfolio and provide you with detailed analysis of the shares you own.

The text book approach to selling a share is straightforward. You ask yourself a simple question, “Would I buy this share today?” If the answer is ‘no,’ then you should sell it. But real life isn’t like that. A better question to ask is probably, “Does this share still represent good long term value, and does it still meet the overall aims of my portfolio.” Even the best companies go through temporary blips and – especially in times like the present – the occasional set of results can be disappointing. If you feel that it’s just a one-off and the share still has good long-term prospects, it’s probably worth forgiving a temporary setback.

If you are thinking of selling a share – particularly if you’re thinking of switching to a company in the same sector – it is important to remember the buying and selling costs of the transaction. Although online share dealing has helped to drive down the cost of buying and selling shares, you still need to take it into account – and it can sometimes make you think again.

Remember too that good performance in difficult economic conditions doesn’t automatically mean a stellar performance when the economy improves. For example, many discount retailers are doing well at the moment: whether they will continue to do so well when the economy improves and the ‘squeezed middle’ returns to traditional shopping patterns is open to doubt.

Above all, don’t get emotionally attached to shares. You may have done very well with a particular share in the past. That’s great. But that doesn’t make it your friend and it doesn’t mean you have to stand by it if it starts to tumble downhill. No share is your best friend. Similarly if a share falls sharply in value there’s almost certainly a good reason. Don’t make the mistake of thinking that a particular share “owes you money.”

So how do you take the emotion out of deciding when to sell a particular share? Some investors like to have a ‘trailing stop-loss’ in place and there is a lot to recommend it, as applied rigidly it takes the decision out of your hands. You might, for example, decide to sell a share if it falls by 20% – so that if you buy at £10 then you will automatically sell the share if it falls to £8. Should the share rise to £15, then your ‘trailing stop loss’ is raised to £12, so that if you sell the share at this level, you have at least locked in an overall gain of 20%.

A stop-loss certainly helps to keep losses to manageable proportions – and meets the old stock market adage, ‘run your profits and cut your losses.’

Your final decision on when and whether to sell a particular share will almost certainly be a mixture of your ‘gut-feeling’ and arithmetic. And it’s important to accept that you’re not going to get every decision right. Even the legendary investors like Warren Buffet make mistakes. None of the highly paid fund managers in the City get every decision right. You’re no different. Sometimes you’ll sell a share for all the right reasons and it will immediately rebound in the opposite direction. You wouldn’t be human if you didn’t think “if only I’d held on.” But if you made the decision to sell for sound, logical reasons you’ll be right far more often than you are wrong.


What does the re-election of Barack Obama mean for your savings and investments?

Thursday 08 November 2012

The votes have been cast, Mitt Romney has phoned President Obama to concede and the victor has graciously accepted the challenge of guiding the faltering US economy through the next four years.

But what does Obama’s re-election mean for world stock markets – and more particularly, for your savings and investments?

At first glance, the signs are good. The Dow Jones index moved up nearly 150 points on Election Day, markets in the Far East generally welcomed the election result and the FTSE opened up on the news. Stock markets like certainty – what they must have feared above all things was a close election that gave rise to legal challenges, meaning that a clear result wouldn’t emerge for several weeks.

But a quick glance below the election night euphoria shows that the President’s in-tray is full of problems – and the biggest is two words that many people have never heard: “fiscal cliff.” This is the term applied to the tax cuts on personal income, capital gains and dividends – originally introduced by George W Bush and extended by Obama – that are due to expire in January. The worry is that the ending of these tax cuts will hit ‘middle Americans’ particularly hard – which will in turn take spending power out of the US economy and see it ‘fall over the cliff’ and back into recession.

Therefore Obama must negotiate with a Republican Congress to find a compromise. This hasn’t been easy over the last four years and it won’t be any easier from January when a new – but still Republican-dominated – Congress is sworn in. With $607bn of tax rises due to hit the US economy in January, all commentators see this as the number one priority. If nothing is done about the ‘fiscal cliff’ it is going to impact adversely on the US domestic economy – and then on the world economy.

Assuming a compromise is reached on this issue, it will still require a huge effort to get the US economy moving again. At the moment it is growing at 2% per year and unemployment stands at 7.9% – and there’s the small matter of $16tn of debt, which Obama has pledged to reduce. Doing this while keeping his commitment to increase Government investment in education, new sources of energy and measures to boost the economy will be a massive challenge.

Looking abroad, Obama must confront Iran’s nuclear programme, and find a way to deal with China. America has to trade with China – but at the same ensure that jobs and technological knowledge are not exported there, to the ultimate detriment of the USA. When all that’s done, he must pray that Europe finds a way out of its debt crisis.

That’s a daunting list – and yet we are broadly optimistic that a second term for Obama will be good for the US stock market, which will in turn be good for world markets and by implication, your savings and investments. There are four principal reasons:

First of all there’s the lesson of history. The US market has traditionally averaged bigger gains under Democratic Presidents than under Republicans. On election morning 2008 the Dow Jones index stood at 9,319: on election morning 2012 it stood at 13,112 – that’s a rise of 40% under a President who many people thought would be unfriendly to business.

Secondly, Ben Bernanke will stay on Chairman of the Federal Reserve – meaning that the policy of Quantitative Easing, which has been so much of a help to capital markets, is highly likely to continue. Wall Street likes Bernanke, and would have been unhappy to see him replaced as would undoubtedly have been the case if Mitt Romney had won.

The likely continuation of QE means that interest rates should stay low. Although this isn’t good news for savers, it is good news for the ‘job creators’ that Romney alluded to in this concession speech.

Finally, a Democratic president and a Republican Congress might be a political problem – but it’s a problem that markets like, simply because it means lots of compromises and a continuation of the status quo. There are not going to be any radical policy initiatives in the next four years.

Politics – as Harold Macmillan so famously remarked – are governed by “Events, dear boy, events.” There are bound to be plenty of ‘events’ for President Obama to deal with in his second term, but overall we feel that the economic outlook is gradually improving. This doesn’t mean though, that it will all be plain sailing. If you have any questions about the inevitable peaks and troughs along the way then, as always, we are just a phone call away.


Changes to UK Child Benefit rules

Thursday 08 November 2012

Changes to the rules on Child Benefit come into force in January 2013 and will reduce the entitlement of about 1.2 million families. Families where one parent is earning more than £50,000 a year will no longer be able to claim the total amount of child benefit, under government rules which will be implemented by Her Majesty’s Revenue and Customs (HMRC).

Child benefit is currently a tax-free payment that is aimed at helping parents cope with the cost of bringing up children. One parent can claim £20.30 a week for an eldest or only child and £13.40 a week for each of their other children. The payments apply to all children aged under 16 and in some cases until they are 20 years old. HMRC pays out to nearly 7.9 million families, with 13.7 million children.

What will change on 7 January 2013 is that a parent who earns more than £60,000, and who continues to claim child benefit, will be taxed. In detail, the benefit received will be recouped gradually as the income of the highest earning parent rises above £50,000, with the child benefit being eroded completely once their income is £60,000 or more. This was announced in the 2012 Budget, by Chancellor George Osborne.

What may happen is that if one of the parents earns more than £60,000, they may choose to stop claiming child benefit, or persuade their partner to do so and save the tax authority the trouble of getting it back. If they or their partner keeps claiming it, then the higher earner will have to admit this in a self-assessment tax form, and HMRC will tax the high earner on the child benefit which they, or their partner, claims. There is an expectation that couples will disclose to each other whether they claim child benefit, or earn above £50,000 a year.

Only one parent can receive child benefit on behalf of their son or daughter. HMRC says it will “expect” couples to give each other basic financial details to see if they should be taxed. HMRC will also let taxpayers ask for rudimentary information from its records to see whether or not their partners receive child benefit, or have an “adjusted net income” above £50,000, and should be paying the new tax. While this runs counter to the general principle of taxpayer confidentiality which has been a formal part of the income tax system since 1803, as well as against the policy of separate taxation of married couples which has been in place since 1991, HMRC says its rules give it the authority to do this.

Problems could arise where couples want to maintain some privacy between each other, for example, if their relationship has broken down. If a couple has split up, both parents might try to claim child benefit, even if they live apart, but only one of them will get it. If somebody is responsible for a child, they normally get the benefit for it. So, usually, the parent with whom the child lives receives the benefit. However, the other parent can get child benefit even if their child does not live with them if they pay towards their upkeep and what they pay is at least the same as the amount of child benefit (so they do not profit) and the person the child lives with is not already receiving child benefit. The changes to child benefit clearly require parents to be open and honest with each other about their income and benefits...


Now we're all equal and it will cost you more

Thursday 08 November 2012

On average women live longer than men. It’s one of the facts that virtually everyone knows and although advances in medicine mean that the life expectancy of men is increasing that fact still holds good today.

According to figures quoted by the BBC in September last year, life expectancy in the UK has reached its highest level. Men can now expect to live an average of 78.1 years – but still four behind women at 82.1 years.

That’s why women have always paid less for their protection policies than men. Simply put, their chance of dying young is lower. However, from December 21st this year all that is about to change thanks to European law.

On March 1st 2011 the European Court of Justice ruled that insurers will no longer be able to use a person’s sex as a factor in calculating the cost of their insurance. The ruling is known as The Gender Directive and comes into force four days before Christmas.

The first point to note is that it will apply to any type of policy that uses gender for any part of the cost or benefit calculations – so it will affect far more than just the cost of basic life cover. Critical illness cover, income replacement cover, health insurance and annuities will all be affected.

So will this mean that the cost of protection for men will fall to the lower rates paid by women? Sadly, no. The exact opposite is the case: insurers have confirmed that the Gender Directive will see across the board increases in the cost of protection policies.

As a firm, making sure that your protection needs are taken care of is an integral part of our financial planning process – but if you particularly feel that you’d like to review your protection policies, it makes sense to take action now. This is perhaps particularly important for women, who have always been under-insured compared to men.

Most insurance companies are saying that they will accept applications on their old rates up to December 20th but with factors like underwriting and possibly the Christmas post to take into account, it makes sense to act sooner rather than later.

Some clients will always dislike paying for protection, but it remains a key part of a complete financial planning package. No-one who’s claimed under a critical illness policy has ever said, “I still think the premiums were too high.” What’s really expensive is not having the cover when you need it – especially when it could be your family that has to pick up the bill. The Gender Directive is going to affect all of us, so it may well make sense to discuss the implications with your financial adviser before 21st December.

Although it’s not something we cover, you should note that the Gender Directive will also apply to your car insurance. Despite the fact that young men under 22 are up to ten times more likely to have an accident, Brussels are choosing to ignore that as it’s ‘discriminatory.’ You couldn’t make it up, could you?


Six Tips to beat Christmas Credit Card Blues

Thursday 08 November 2012

Ask most people to guess at the most depressing day of the year and they might choose the day they go back to work after the summer holidays, or the day when the clocks go back and it’s suddenly dark at five o’clock.

In fact, studies have shown that the ‘worst’ day of the year is ‘Blue Monday’ – which next year will be on Monday, January 21st.

Why that day? Because for most people the glow of Christmas and New Year has worn off, it’s still cold and dark, the summer holidays seem an impossibly long way away – and it’s the day when the Christmas credit card bills arrive.

Many people are desperate to ‘have a good Christmas’ and with all the economic woes around it will be a stronger temptation than ever this year. But for too many of us this means too much spending that we can’t afford – with the inevitable gloom when the festive bills roll in.

Is there anything you can do to avoid this? To make sure you still have a great time without the attendant financial pain? Maybe there is – here are half a dozen simple tips to make sure that your happy Christmas isn’t followed by the bluest of Blue Mondays.

1. Spread your buying over a few months. Many of us sneer at the people who cheerfully say in August, “Christmas? All sorted thanks. All the presents bought and wrapped. Nothing to worry about.” But one thing is for certain – these are not the people who’ll be hiding from the postman on January 21st.

2. Save – if the idea of buying Christmas presents in your shorts and flip-flops is too much for you, then try and save something towards the cost of it through the year. This was the theory behind the old fashioned ‘Christmas Clubs’ which so many shops used to run. With the advent of the national chains the practice seems to be on the wane, but it could be yet another case of ‘Granny knows best…’

3. Shop online – it may not be in the best tradition of wandering the shops and staggering to the car laden down with bags, but shopping online has a lot to recommend it. You’re saving time, you’re saving the cost of petrol and parking and the chances are you’re working off a list – so there’s less scope for last-minute impulse purchases sending you over your budget.

4. Shop around – perhaps not so true for those special presents, but with some reports suggesting that the average family will spend £100 at supermarkets and off-licences on alcohol alone over Christmas, shopping around and taking advantage of special offers on the ‘essentials’ could lead to significant savings.

5. Set a limit – at the risk of sounding like Mr. Scrooge, set a limit on your spending. Many parents set a limit in order to be fair to each child and doing this means that you will know what your ‘maximum spend’ will be for Christmas – and you can budget accordingly.

6. Finally, be inventive. A quick search on Google will throw up any number of do-it-yourself Christmas present ideas that will save you money – and there’s no reason why children can’t make their own Christmas cards. This is an area where the old saying, ‘Look after the pennies and the pounds will take care of themselves’ can make a lot of sense.

Christmas is always going to be expensive, especially for families. But with a little planning and preparation you can make sure you’re not facing a ‘Blue Monday’ on January 21st.


October Market Commentary

Thursday 04 October 2012

‘No news is good news’ as the old saying goes – or as world stock markets interpreted it in September, ‘No catastrophic news is good enough, thank you.’

Clearly all is still not well with the world’s economy, but there were no full blown crises in September and most stock markets took this as their cue to inch forward. Amongst major markets, Germany and Hong Kong were the star performers. China finally reversed several months of falls, whilst Japan – despite economic worries – was virtually unchanged. But with new tensions between China and Japan (as described below) this region needs watching carefully.

The news for the UK was – as ever – mixed, with some good news on the jobs front muted by some very poor balance of payment figures. Prime Minister David Cameron heads to Birmingham for October’s party conference trailing Labour by a wide margin in the latest polls, and haunted by the news that Boris Johnson is preferred as party leader. Clearly not all of us are benefiting from an ‘Olympic feelgood-factor…’


The month started with good news for the UK economy: the Guardian reported signs of a summer recovery in the manufacturing sector, and Honda announced that investment in its Swindon plant had reached £267m, with plans to increase production of three of its models. However, this was swiftly followed by the loss of 760 jobs at Northern Ireland engineering firm, FG Wilson.

The news for retail wasn’t good, with it finally being confirmed that the Olympics had hurt high street sales. Excluding the poor Easter, August was the weakest month for retail since last November. There was further bad news when JJB Sports went into liquidation. Sports Direct are expected to take over some of the stores, but significant job losses look inevitable.

Evidence that the high street continues to suffer at the hands of the internet came when Tesco announced that they would be opening more ‘dark stores.’ These are not supermarkets catering for the shopping habits of Darth Vader, but shops that are closed to the public – existing only to service online orders. There are already four in London, and Tesco now plan to open similar stores around the UK.

On the economic front the really bad news was saved for the end of the month when a UK trade deficit of £20.8bn was confirmed for the second quarter – the biggest ever trade deficit in one quarter. Clearly the turmoil in Europe had some part to play, but the figures were nevertheless disappointing. The Chancellor’s Autumn Statement is on December 5th and critics are already predicting that George Osborne may have to admit that his economic policies are not working.

Having started the month at 5,711 the FTSE finished it at 5,742. It had been significantly higher before the inevitable drift downwards on the end-of-month bad news.


The month started on a slightly downbeat note for Europe, with Moody’s lowering expectations for the EU’s long term AAA credit rating. This is now ‘negative’ – hardly surprising given that (according to the BBC business desk) the problems of the Spanish banks may have been understated.

But there was a dramatic turnaround on September 7th, with stock markets soaring as ECB President Mario Draghi – and no, I can’t resist the Super Mario joke – singlehandedly saved the world, despite the fierce opposition of the Bundesbank. Draghi’s plan is simple – it’s to buy the bonds of the distressed Eurozone countries such as Spain and Italy in almost unlimited amounts. The scheme is known as OMT (Outright Monetary Transactions) which the Germans condemned as “tantamount to financing governments by printing banknotes.”

Of course, countries that want a bailout – sorry, an outright monetary transaction – will have to agree to all sorts of stringent conditions and sign a pledge of everlasting austerity. European markets rose sharply when the plan was announced, but many were unconvinced. Larry Elliott in the Guardian was one of several commentators to be sceptical, describing Draghi’s plan as being ‘based on flawed economics’ and warning that it would not save the Euro.

We shall soon see… Figures released at the end of the month from an independent audit of Spanish banks showed that they would need a bailout of €59.3bn to survive ‘a serious downturn’ in their fortunes. It is hard not to think that at some point the prudent Northern Europeans might lose patience with their Southern cousins.

And yet the Dutch went to the polls on September 12th with many pundits predicting gains for the far-right and far-left parties, which would have been widely seen as a vote against Europe. In the event the voters resoundingly backed the pro-Europe centrist parties, inflicting a heavy defeat on the Eurosceptic far-right in particular.

The month ended with a general strike in Greece – for those people still counting it was the third in recent times. Finance Minister Yannis Stournaras warned that the country faced a thirties-style ‘great depression.’ It cannot be long before the EU comes under pressure to relax the terms of Greece’s €130bn bailout.

Star performer among the major European markets was the German DAX index, up by 4% to close the month at 7,216. The French index fell by 2%, whilst among the more ‘adventurous’ European stock indices, Italy was unchanged, Spain up by just under 4% and Greece – despite the strike – up by over 14%.

United States

Little more than five weeks to go to the US Presidential Election and if the men with the satchels (bookmakers if you’ve led a sheltered life) are to be believed, Michelle Obama can once again start planning to re-decorate the White House.

Her husband is well ahead in the polls, although whether this is good news for the US economy depends on your political standpoint. Having been borrowing since the 1700s (when it needed money to finance the American Revolution) the US Government is now $16tn in debt (which is around $50,000 for every man, woman and child in the country). Democrats and Republicans continue to argue over how quickly the deficit should be reduced. ‘Very gradually’ say the Democrats, and so far this argument seems to be holding sway.

The really good news for the US in September came with the report that private firms had hired 201,000 new employees in August, well ahead of the forecasts. With the July figures also revised up by 10,000 this was a real shot in the arm for the economy. Unemployment may still not be falling as quickly as the Federal Reserve would like – the figures for August showed a slight fall to 8.1% – but it is clearly moving in the right direction.

Nevertheless the Federal Reserve announced another round of Quantitative Easing on September 13th, saying that it would continue to buy up mortgages. Is the Fed bailing out the banks at the ultimate expense of the taxpayer? Or helping to create the conditions in which unemployment can fall and the economy can pick up? Only time will tell.

But while we wait for the eventual verdict it was a good month for the Dow Jones: it finished September at 13,437, having started the month at 13,090.

Far East

Perhaps the most worrying news to come out of the Far East in September wasn’t economic, but political. Japan and China held what were described as “severe” talks over the disputed Senkaku Islands. The Islands are in the East China Sea and in 1968 it was discovered that they may be close to substantial undersea oil reserves. They’re currently controlled by Japan, but both China and Taiwan dispute this. With anti-Japanese riots breaking out in China, this is a potentially worrying development in the area.

Inevitably there were concerns about the Chinese economy as well: figures for August confirmed that exports had grown less than had been forecast, and imports had also decreased, leading to fears of a slowdown in the Chinese economy.

Central banks in both Japan and Taiwan launched stimulus packages to try and boost their economies in the face of a potential worsening of trade in the region, with Japan’s growth figures for the second quarter being revised sharply downwards.

The Chinese stock market reversed recent falls by finishing the month up 2% at 2,086: Japan was virtually unchanged and the Hong Kong market rose by an encouraging 7% to close the month at 20,840.

Emerging Markets

Among the larger emerging markets, India enjoyed an excellent month, rising by 8% to close at 18,763. Brazil also rose – by 4% – whilst the Russian MICEX index was up by just four points to 1,458.

Among smaller countries the stock markets of Slovenia, Sri Lanka and Cyprus were the winners, with perennial superstar Venezuela managing a frankly pathetic 6% gain on the month. Wooden spoons were handed out to Tunisia and Morocco, with both markets falling by around 5% in September.

And finally...

With the world economic outlook continuing to look uncertain, many investors are still looking for alternative investments – and what could be better than a Prime Minister’s old clothes? An anonymous bidder snapped up the suit Margaret Thatcher wore on the day she was confirmed as Tory party leader for £25,000 whilst a bidder from South Korea bought six other items from her former wardrobe.

You should also feel cheerful if you own a warehouse full of olive oil, as the recent drought in Spain will apparently push up prices to record levels. But perhaps that’s good news for those of us whose waistlines have paid the price for the words ‘lightly drizzle with olive oil...’


Quantitative Easing: what is it? And how does it work?

Thursday 04 October 2012

We’ve all heard the term ‘quantitative easing.’ With the global economy seemingly in a state of crisis for the last five years it’s been hard not to. But what is quantitative easing? How does it work? Why do the central banks use it – and what does it mean for you?

Clearly, many of the economies around the world need help. The normal reaction of a central bank – whether it’s the Bank of England, the US Federal Reserve or the European Central Bank – will be to lower interest rates when it wants to boost an economy. The problem is that interest rates are already at rock bottom: they’re so low that lowering them further will have no significant impact. So the central banks need a new tool – and that’s where ‘quantitative easing’ comes in.

Simply put, quantitative easing is the act of creating more money. Central banks can do this because everyone accepts their money. These days, creating more money is as easy as a keystroke on a computer – it’s not a question of printing more banknotes! The aim of doing this is to bring down interests rates paid by companies and households, by promoting increased liquidity in the economy and increased lending by the commercial banks.

With its new money, the central bank can buy whatever it wants – government bonds and corporate bonds are typical purchases. With increased demand for these bonds, the price should rise and the yield on them should fall. As much of this new money will end up with the ‘high street’ banks, they should find that their liquidity position is improved and hence they’ll be more willing to lend to businesses and consumers.

So much for the theory. Does quantitative easing work in practice? Clearly there are risks. Firstly, any ‘creation’ of extra money brings with it an inherent risk of inflation – but as we’re seeing, in the current economic climate the central banks think that risk is a price worth paying. Secondly, a central bank could lose money on the bonds that it buys. If that happens even more money may need to be created in the future, further fuelling inflation. Alternatively the losses may need to be recouped through higher taxation. You could also argue that lowering interest rates can harm an economy – after all, many savers rely on a good rate of interest to boost their income. If these people receive less income because of lower interest rates, then inevitably they’ll spend less.

Finally – as we’ve seen in countries like Greece and Spain – the very act of using quantitative easing may simply destroy confidence in an economy, making the whole measure counter-productive.

The problem is that no-one really knows how much quantitative easing is enough, and how much is too much. Even the central banks are having to play it by ear, which is why you’ll see headlines such as ‘Bank of England pumps £50bn into economy in another round of QE.’

Opinions are split on whether quantitative easing has worked. The International Monetary Fund says it has. Commentators such as Alan Greenspan, the former head of the US Federal Reserve, are less sure, arguing that there has been “very little effect.” There’s also an argument – particularly in the USA – that using quantitative easing to buy mortgage backed securities that are potentially worthless amounts to little more than transferring a financial liability from the banks to the taxpayers.

One thing is for sure: with the world’s economies continuing to struggle, you’ll hear plenty more of ‘quantitative easing.’ Don’t think it’s just a technical term used by bankers – it has long term implications for all of us.


The financial advantages of getting married

Thursday 04 October 2012

Marriage is not for everyone, and for people with complex family lives it can create as many problems as it solves. The cost of a wedding can be huge, and a messy divorce can set you back even further, but for those who stay together the financial benefits of marriage remain considerable.

If you are, however, in one of the more than four million cohabiting households in Britain, tax experts fear that many, particularly those with high-value properties, are sitting on massive tax liabilities in the event that one partner dies. You may think your accountant is the last person to persuade you to take a trip down the aisle, however, and if saying “I do” is a step too far, then at least make sure you plan for the unexpected.

Figures from the Office for National Statistics (ONS) earlier in 2012, show that the number of marriages rose by 3.7% in 2010, reversing a downward trend. But while the Government has yet to yield to calls for an explicit tax break for married couples, that does not mean there are no tax advantages to marriage.

A major tax problem for cohabiting couples with property and other assets with a combined value of more than £650,000, is that they face an Inheritance Tax (IHT) charge if one party dies. This is because unmarried partners can only pass assets up to the nil-rate band of £325,000 free of death duties. Beyond that figure, IHT of 40% is attracted, presenting families with a real challenge in the event of the death of one party. Anything left to a spouse or civil partner, on the other hand, is exempt from inheritance tax.

The survivor is allowed to “inherit” the other party’s nil-rate band, meaning the full £650,000 can pass to, for example, children, on the death of the second spouse or civil partner. Furthermore, if an unmarried partner has not made a will, the surviving partner will not automatically inherit anything from them at all, even if they have had children and lived together for years.

The state pays bereavement allowance to recently widowed spouses and civil partners, but cohabitees are not entitled to this. If your husband, wife or civil partner dies when you are over 45 but under state pension age, you may be entitled to bereavement allowance. This benefit is paid for 52 weeks after death, the amount you get depending on how much NI contributions they had paid in their lifetime and your age. Maximum weekly payments are around £32 for a 45 year-old, rising to £106 for those between 55 and state pension age.

Tax experts recommend that wealthy married couples and civil partners maximise both Capital Gains Tax (CGT) annual allowances. Where CGT is payable, it is paid at 18% for basic-rate taxpayers and 28% for higher-rate taxpayers. So where capital gains exceed the annual CGT exemption, spouses and civil partners are able to reduce their tax bill because they have the ability to transfer ownership of the asset to the party paying CGT at the lower rate without creating a tax liability.

Both married and unmarried couples can cut their overall Income Tax bill by distributing their wealth between them so that all personal allowances are used up and tax is paid at the lowest possible marginal rate. Widows, widowers and surviving civil partners can inherit both basic and state second pension based on the contributions of their deceased partner if their accrual is higher than their own, but this is not an option open to unmarried cohabitees.

In extreme cases, for example where the surviving partner brought up children in the Seventies and then worked for years on low part-time earnings, meaning they have less than 10 years’ National Insurance contributions, the difference between marriage or a civil partnership and informal cohabitation could be more than £7,000 a year in extra state pension for life.

In conclusion, for those who have already taken the plunge, bear in mind that through each ‘lovers tiff’ or each time you and your partner are referred to as ‘an old married couple’ there are tangible benefits to being married, even if they are tax related!


Grandparents can make a grandchild a millionaire from just £240 per month

Thursday 04 October 2012

According to data produced by Skandia, if grandparents put just £240 a month (which equates to £300 a month gross contribution) into a pension for a grandchild each year for 18 years, when the grandchild reaches age 60, they could be a millionaire.

This is based on 6.5% investment growth p.a. and no further contributions being made by the child. The child can of course make further contributions when they start work to create an even bigger pension fund.

From the moment a child is born, they are eligible to receive contributions of up to £3,600 into a pension each year. Anyone is able to make the contribution on behalf of the child. Unlike other investment options, such as a junior ISA, a pension can provide basic level tax relief even for a child who is not working, making it an extremely attractive long term savings option. On an annual contribution of £3,600, £2,880 is paid by the grandparent and £720 is paid by the government into the pension in the form of tax relief.

The money is, of course, locked away until the grandchild reaches at least age 55, which might not be considered a bad thing. Children born today are unlikely to enjoy the same level of retirement income funding that the current level of baby boomers are enjoying. They will need to be more self-providing as support from the state is likely to diminish, and arrangements like final salary pension schemes disappear.

The younger generation do not always understand the need to save for retirement, and many cannot afford to. Parents already find themselves needing to put aside for their children’s later education. Therefore, opportunities for grandparents to make significant contributions are not to be missed. It is not until someone approaches retirement and they are faced with a finite income until they die, that they wish they had saved more. Those in retirement are best placed to pass this wisdom on to the younger generation, and opening a pension for them is a good way of ensuring their long term financial future.

If grandparents plan to leave some of their estate to their grandchildren and have surplus income from their own pension income, this is an extremely tax efficient way of passing money to them.  If the surplus income is available from an income withdrawal arrangement, it will take money out of a 55% death tax charge environment. If the surplus income is created from an annuity payment, the contribution to the grandchild’s pension takes the money out of their estate.

Once the contribution is made into the child’s pension, the future investment growth of those contributions belongs to the child, creating significant longer term value compared with the money remaining within the grandparent’s estate.  The income tax paid by the grandparents on the pension income can in part or whole be offset by the income tax relief boost the child receives on the contribution made.


September market commentary

Thursday 20 September 2012

Anyone remember August 2007? Kanye West was number one with Stronger, Sven-Goran Eriksson was Premier League manager of the month – and the world was having a financial crisis. August 2007 was “when the world changed” according to Adam Applegarth, the ex-CEO of Northern Rock. It was the month when the US Federal Reserve and the ECB saw ‘a sudden lack of confidence’ and had to inject $90bn into the financial markets.

Five years on it would seem that – financially at least – not much has changed. The world continues to lurch from crisis to crisis and ‘a sudden lack of confidence’ has become a more or less permanent state of mind. Much of the news in August was bad, as it had been in July. And yet – as they had done in the previous month – most of the world’s leading stock markets managed to creep upwards. The notable exception – again as in July – was China, where there are real fears about the slowdown in manufacturing.


The first two weeks of August saw the UK hosting the Olympics. Unfortunately the stellar performances of Team GB were not matched by Team GB Economy, and while David Cameron might have been basking in a warm glow while he was in East London it would certainly have gone by the time he was back at his desk.

‘Bank of England cuts UK growth forecast.’ ‘UK inflation up.’ ‘UK tax receipts down.’ The headlines were almost unremittingly bad – plus it appeared that the Olympics had failed to produce the hoped-for economic bonanza, with many central London businesses reporting record low takings as people decided to work from home and tourists staying away due to fears of congestion and high prices.

Despite all this, the FTSE managed a modest rise in August, up from 5,635 to close the month at 5,711.

There was also good news on the housing front. Nationwide’s figures for July had shown the biggest fall in prices since 2009, but the August figures were a revelation, with a 1.3% rise taking the price of the average home in the UK to £164,729.


European markets faltered at the beginning of the month as ECB Chief Mario Draghi announced that he would do “whatever it takes” to boost the European economy and then said he would have a plan “within the coming weeks.” Cynics suggested that meant when he got back from holiday, and markets – like bankers and politicians – predictably headed south.

The next day early details of the ECB plans were released and the markets recovered – although whether this was due to Senor Draghi’s conveniently discovered plans or the US announcing the creation of 163,000 new jobs was difficult to tell.

The harsh reality is that Europe faces a double-dip recession with growth falling to 0.2% in the 2nd quarter and the private sector contracting for the seventh month in a row. Inevitably the news from Spain and Italy was disappointing and “Spanish recession worse than feared” was an early contender for least-surprising headline of the month.

The July unemployment figures were released in August and once again showed that unemployment had reached a new high, with 18m people out of work throughout the eurozone. The unemployment rate is now 25.1% in Spain: the lowest is in Austria, at 4.5%.

Despite all this bad news stock markets across Europe rose, with healthy rises seen in Spain, Italy and Greece. The German DAX index was up just under 3% to finish the month at 6,971 and there was a similar rise in France, with the market ending the month at 3,413.


There are now less than 3 months to go to the US Presidential election, with Mitt Romney finally confirmed as the Republican nominee. The race remains tight, with mixed news on the economic front. As reported above, the US created more jobs but manufacturing jobs continue to go overseas, with workers at one factory in Illinois being forced to train the Chinese workers who will shortly take their jobs.

However the gloom didn’t reach as far as Infinite Loop, Cupertino, California as Apple became the most valuable company of all time, surpassing a valuation placed on Microsoft in 1999. 15 miles and 23 minutes away at Menlo Park the news was less good. Facebook shares continued to fall, reaching 50% of their IPO price.

Away from the billionaires, growth in the US slowed in the second quarter, falling to 1.5% as consumer spending slowed. Inevitably, the Federal Reserve announced that it was planning ‘stimulus action.’

The Dow Jones reacted to all of this by just managing to stay above the 13,000 level – but the rise was less than 1% in the month, with the index finishing at 13,090.

The Far East

As reported above, the big news coming out of the Far East in August was the slowdown in China, with both industrial growth and retail sales growth falling. It’s important to stress that both are at levels that more established markets can only dream of – industrial growth, for example, fell to 9.2% – but the signs are clearly worrying. This was reflected in the performance of the Chinese stock market, which fell by 5% to close the month at 2,110. Over the past twelve months the market is now down by 24% – a bigger fall than that recorded by Spain where the stock market is ‘only’ down by 18%.

It was confirmed that the Japanese economy had expanded in the 2nd quarter of the year – albeit by only 0.3% – but the July figures showed the country posting a trade deficit of 517m yen as exports to China fell and the continuing slowdown in Europe impacted further on Japanese exports. The stock market managed a small rise however, gaining 1.6% to finish the month at 8,839.

Elsewhere in the region the Hong Kong index was down very slightly, closing the month at 19,482. Of the smaller markets, Thailand, Taiwan and Malaysia all rose, whilst the markets in Singapore and the Philippines were slightly lower.

Emerging Markets

Of the major emerging markets Indian and Brazil were virtually unchanged through August. Russia posted a useful rise though, with the market up over 3% to close at 1,454. Star performer of the month was – as usual – Venezuela, up by a paltry 17%, but honourable mentions must go to Greece and Italy, where the stock markets rose by 9% and 8% respectively.

In general most world markets had a good month in August. China turned in the worst performance and with the crisis nations of Europe in the headmaster’s good books for once, it was left to Mexico and Sweden to have ‘must do better’ scrawled across their monthly reports.

And finally…

As previously noted “Spanish recession worse than feared” was an early front runner for the ‘least-surprising headline of the month’ award. However it was pipped at the post by the Guardian’s bombshell, “George Osborne unpopular.” With the UK economy resolutely refusing the Chancellor’s kiss-of-life, what’s the betting on a re-shuffle before the party conference season?


Tax liability for dividend income and interest income

Thursday 20 September 2012

UK dividends are income from UK company shares, unit trusts and open ended investment companies. Dividend income is not the same as income from interest and for taxable purposes the two are treated by HMRC separately and differently.

You have a liability to pay tax on dividend income that you personally receive. The tax rates as indicated are different to those you pay on other income such as wages, profits from self-employment, pensions and interest from savings, and bank and building society interest.

Dividends are taxable payments declared by the board of directors of companies to be paid to the shareholders out of current or retained earnings. They typically are cash payments, although at times you may get the dividend in stock or other property. They could be issued every month, every quarter, twice a year, annually, or in special circumstances at other times. Interest income for the taxpayer is a return on investing where you are effectively making a “loan”, usually to a bank or building society where you have a savings account that offers an interest rate, at which you earn the interest.

There are three different Income Tax rates on UK dividends in 2012-2013. The rate you pay depends on whether your overall taxable income after allowances, falls within or above the basic or higher rate Income Tax limits. The basic rate Income Tax limit is £34,370, and the higher rate Income Tax limit is £150,000 for the 2012-13 tax year.

The tax rate applied to dividend at or below the £34,370 basic tax rate limit is 10%. Above that tax limit and up to the higher rate limit of £150,000, the dividend tax rate is 32.5%, and beyond that limit the dividend tax rate becomes 42.5%. It doesn’t matter whether you get dividends from a company, unit trusts or open-ended investment companies, as all dividends are taxed the same way. There are four different Income Tax rates on savings income: 10 per cent, 20 per cent, 40 per cent or 50 per cent. The rate you pay depends on your overall taxable income.

Companies pay you dividends out of profits on which they have already paid, or are due to pay, tax. To avoid tax being paid twice, when you get your dividend you also get a voucher which records the dividend and also gives you an entitlement to an associated ‘tax credit’ in recognition of the tax paid by the company. This 10% tax credit is available to the shareholder to offset against any Income Tax that may be due on their ‘dividend income’. The simplest example is where the dividend is at or below the £34,370 basic income tax rate limit, because here the 10% dividend tax to be charged is exactly cancelled out by the tax credit being 10%, and hence you have no dividend tax to pay. At the higher dividend tax rates, the tax liability is only partially reduced by the 10% tax credit.


Getting your Financial Planning ready for University

Thursday 20 September 2012

The A-level results came out on August 16th and thousands of teenagers up and down the country are now looking forward to starting university in September. Their parents, however, might be gloomily looking at their bank accounts and taking a rather different view.

With fees of up to £9,000 and accommodation costs of say, £5,000 per year, a student starting at university this September is going to graduate with a debt approaching £50,000. Many parents understandably want to help their children avoid this. However, evidence from the USA – where student loans have long existed – suggest that as the economy wobbles, many families are facing an excessive strain as they try and minimise the amount of debt that will now come with a degree.

Fortunately, there are some simple financial planning steps that you can take to guarantee that the good news of the A-level results isn’t swiftly followed by depressing financial news.

Typically, a child starting at university will mean two demands for money – immediate, and longer term.

In the short term there’ll be things you need to buy your son or daughter before they leave home – what teenager doesn’t need a new laptop? However, the university may also ask for money by way of a deposit against accommodation costs or – depending on where your child is going – a college bill for food.

If these costs can’t be met from income then they are ideally met by long term saving. Putting away just a small amount each month when your child starts secondary school should mean that there is a reasonable nest-egg ready for when they start university.

A regular contribution to your child’s ongoing university costs over a three or four year course requires more serious planning – and again, the US provides a salutary lesson. In the past, many families paid for their children’s college costs by using the equity in their homes. Unfortunately, the economic slowdown and subsequent fall in house prices has now left many families who did this without any equity in their properties.

Doubtless some people in the UK will fall into the same trap – but there’s no need to, as some basic financial planning should enable you to help your son or daughter through university, without breaking the family budget. Long term savings are the key, and we’ll be happy to advise you on the most cost effective way of doing this. The same principles will apply to university costs as to any long term financial planning goals: make sensible plans and review them regularly – and make sure your savings are invested as tax-efficiently as possible.

We’ve worked with hundreds of clients to help them do this: if you’d like to speak to us, simply pick up the phone or drop us an e-mail.

One last point: fortunately, it’s not all down to the parents! Here are three financial planning steps your children can take before they bid you a tearful farewell and plunge into Freshers’ Week:

Sort out the best student bank account – while your son or daughter may have had a bank account for some years, it may not be the best one now they’re going to university. There’s keen competition between the banks and some shopping around on the internet may well pay dividends.

Learn how to handle money and do some basic budgeting. Stories of students blowing their loan or grant in the first week of term and living on chips for nine weeks are legion. Make sure your child isn’t one of them.

And the third recommendation? Work. Student holidays are long and money earned in the summer is money that doesn’t have to be borrowed – or provided by parents.


9 financial planning steps you should take in the 5 years before you retire

Thursday 20 September 2012

For most of us, it’s simple. Go to work every month, get paid, have a look at the pension deduction on your wage slip. Once a year you receive a pension update that you don’t really understand. Oh well, pop it in the drawer with all the other updates…

And then one morning it hits home. You look in the mirror, see the grey hair – or lack of hair – and suddenly realise. “Five more years and I’ll be retired. Five more years and all those pension updates will be what I’m living on for the rest of my life.”

At that point planning for your retirement should become serious. For many of us, realising there are only 5 years to go before the longest holiday of our life will prompt us into sorting out our financial planning. Here are 9 tips to help you make sure that your retirement is as prosperous as possible.

1. Find your paperwork

This may sound silly, but find your paperwork. You cannot sort out your old pensions from previous employers, or make a decision on whether your life cover policy is still needed, if you can’t find it. Some clients have everything organised – but far too many think the crucial documents are “somewhere in the spare room.” So make a start and find all those pieces of paper that might determine your future financial well-being.

2. Think about your health

If you’re five years from retirement you’ll have reached the age where a few parts of your body aren’t functioning as well as they once did. Are you physically fit enough to work for another five years? If you don’t think you are – and you’d like to retire sooner rather than later – then the need for financial planning is even more urgent.

3. Sort out your old pensions

Many of us have pensions from previous employers that we’ve forgotten about or neglected. Sometimes the amounts that are in these schemes can be surprisingly high. Whatever the amounts, the paperwork needs finding and the pension needs sorting out – even if it is something as simple as making sure the scheme administrators have your correct address. Don’t be one of the thousands of people who leave pension benefits unclaimed.

4. Think about ‘Added Years’

Some pensions schemes – the NHS scheme is probably the best known example – allow you to buy “added years” of service. This means that instead of your pension being based on say, 18 years, you might be able to make an extra pension contribution and buy some ‘added years.’ Your pension administrator will have all the details of this if it is available – and for some members it can be a very effective way of boosting a pension.

5. Check your mortgage

Plenty of people with five years to go to retirement still have a mortgage outstanding. It makes sense to review your mortgage to make sure (if at all possible) that it is paid off before or when you retire. It might be prudent to look at a fixed rate mortgage as well: if you’re budgeting carefully before retirement, fixing what is almost certainly your biggest monthly outgoing could help prevent unpleasant shocks if interest rates rise.

Your home may be repossessed if you do not keep up repayments on your mortgage.

6. Check your state pension

If you haven’t contributed to a private or company pension scheme – or if you have only contributed small amounts – then the state pension is going to be crucial in your retirement. The details of how to get an estimate of your state pension are on the DirectGov website. Knowing how much state pension you’ll receive means that you can plan far more accurately.

7. Are you paying for life cover you don’t need?

As people age their need for life cover generally decreases, especially if the children have left home and the mortgage is paid off. But it’s all too easy to simply let a direct debit go out of the bank each month: if you’re still paying for life cover, ask yourself if you really need it. Maybe the money could be better used somewhere else – for example, in additional savings.

8. Make sure your investments are tax efficient

Like it or not, you’re going pay tax on any income you receive from your pension, so it makes sense to make sure that any investments you have are arranged as tax efficiently as possible. There are various ways to do this – which leads us on to the final point…

9. Get some specialist advice

The eight points above are useful – but in many ways they’re just the tip of the iceberg. A lot can be achieved in the five years before you retire, but there will come a time when you need some specialist advice. A good IFA will help you make a comprehensive plan for your retirement – working out exactly where you are now and letting you know what needs to be done in the next five years to give you the lifestyle you want in retirement.

We’ve done this for hundreds of clients and if you’d like to chat to us about it simply give us a call or drop us an e-mail. We’re happy to help.


August market commentary

Monday 20 August 2012

Last year it was Greece: this year, it’s Spain. Summer comes around, and with it comes another European country in crisis. On July 23rd the Spanish government had to ban short-selling of shares, bond yields reached unprecedented levels and it looked like the whole country – not just the banks – would need a bailout. ‘Plus ca change’ as the new French president would say.

The problems of the Spanish banks and their exposure to property are well documented. These are now being compounded by the fact that more Spanish regions – including Catalonia – look certain to follow Valencia in seeking financial help from Madrid.

If Spain does require a bailout – and ECB chief Mario Draghi has said he’ll do “whatever it takes” – then the burden will inevitably fall on the more prudent European states such as Germany, the Netherlands and Luxembourg. Moody’s accordingly changed their economic outlook forecast for these countries from ‘stable’ to ‘negative.’

Away from the European crisis the rest of the world rumbled on. America is increasingly focused on the forthcoming presidential election, with Obama still ahead in the polls – but only just. China reported that GDP growth in the first quarter of the year was the lowest for three years and that the economic growth target for the year had been reduced to 7.5%.

Britain, meanwhile, decided to put any economic problems on hold for two weeks and concentrate on the Olympics. Unfortunately two weeks is a long time in economics at the moment and who knows what the position will be when the Olympic flag has been folded up and formally handed over to Rio de Janeiro…


George Osborne reeling as the economy enters the disaster zone. Not the headline David Cameron wanted to wake up to on the day before the Olympics – but unfortunately the GDP figures for the UK were far worse than expected and it was the Chancellor who bore the brunt of the criticism. The data from the Office for National Statistics showed that the economy had shrunk by 0.7% in the three months to June and apparently left the City “stunned.” According to the opposition – “the Government’s deficit reduction strategy [was] in tatters.” With the Government borrowing £1bn more than anticipated in June it certainly appeared that Plan A was a little off course.

More banks were implicated in the LIBOR fixing scandal and (to no-one’s surprise) banking is now the least trusted profession in the UK. At least there’s a ready made scapegoat if the medal haul of Team GB doesn’t come up to expectations…

UK mortgage lending fell in June – repayments outstripped new loans for the first time in 12 months – and the number of new mortgages approved was down to 44,192, the lowest for 18 months

And yet the UK also managed to produce plenty of good news in July. BMW are to invest £250m in their UK plants over the next three years, and Jaguar announced that they will be creating an extra 1,100 jobs at Castle Bromwich. A £4.5bn Intercity rail deal will also see 900 new jobs in the North East.

The UK stock market rallied slightly through July, and ended the month marginally up at 5,635.


While there was good news for the UK on the jobs front, the employment situation in Europe can be summarised in one word: “grim.” The jobless rate in Europe is now 11.1% – the highest since the creation of the euro. Youth unemployment rose to 22.6% in May with over 50% of the under-25s in Greece and Spain without work. In Spain as a whole there are now 5.7m people unemployed.

How long these levels will be manageable without some social consequences is debatable. Perhaps anticipating this there was a meeting between the US Treasury Secretary Timothy Geithner and Germany finance minister Wolfgang Schaeuble at the end of the month. They agreed on more cooperation and the world’s stock markets breathed another sigh of relief and edged up a few points. Meanwhile the EU finance ministers happily signed off the terms of the bailout to the Spanish banks.

Unsurprisingly, the Spanish stock market turned in the worst performance among all major markets in July, falling by just over 5%. Italy and Portugal also fell, but markets in France and Holland moved ahead. Denmark also turned in a strong performance, rising 6.49% in the month, and the German DAX index finished the month at 6,772 – a rise of 5.5%.


A mixed bag of economic indicators for the United States in July: the rate of inflation remained unchanged at 1.7% and the trade deficit narrowed slightly to $48.7bn. Against this, most experts viewed the 80,000 new jobs created as slightly disappointing and unemployment was more or less unchanged at 8.2%.

President Obama continues to lead Republican Mitt Romney in the polls – albeit narrowly – and still looks the marginal favourite for the November election.

In company news, Microsoft posted it’s first ever loss ($492m in its fourth quarter thanks to a failed acquisition) and the profits of Amazon and Starbucks were also deemed ‘disappointing.’ Facebook (now approaching a billion users) posted a second quarter loss of $157m and its shares continued to fall – with the Swiss Bank UBS admitting it had lost $350m investing in them.

Despite these disappointments the Dow Jones index closed up fractionally on the month, finishing at 13,008 – putting the US market up 6.5% on a year-to-date basis.

Far East

Although both imports and exports slowed in June, the Chinese trade surplus widened to $30bn. Exports for June totalled $180bn – up more than 10% on the previous year.

China’s Central Bank lowered the benchmark interest rate to 6% – this was the second reduction in less than a month and is a clear move aimed at boosting the economy. Inflation in China fell to 2.2% as pork prices (one of the biggest contributors to recent inflation) finally declined.

However the Chinese stock market fell significantly – down 5% on the month (a fall almost equal to Spain’s) as there were clear worries about the world slowdown affecting the Chinese economy. As noted above, the economic growth forecast for the year was also reduced. Manufacturing was under pressure in China and it was interesting to note that another export-led economy, Taiwan, also slashed its growth forecasts in the light of the slowdown.

The Japanese stock market was also down, falling just over 3% to 8,695, whilst the other major Far Eastern market, Hong Kong, finished the month fractionally up at 19,796.

Emerging Markets

The World’s emerging markets turned in their usual mixed performance in July. India was slightly down, Russia was slightly up and Brazil rose by just over 3% to finish the month at 56,097. As already noted, Denmark was the outstanding performer among World markets, with those countries that have significant debt problems leading the way down.

On a year to date basis the performance of Venezuela continues to outstrip every other market – it is now up by more than 100% this year. Denmark, Estonia, Turkey and the Philippines are all up by over 20% in 2012.

Regular readers will not be surprised to learn that Spain and Portugal have suffered the heaviest falls in the current year.

And finally…

A report for the Tax Justice Network pointed out that “a global elite of the super-rich” had at least $21tn hidden in offshore tax havens at the end of 2010. With the need to write about banking bailouts and the wealth of American whizz-kids, the default unit of currency for this monthly report is the ‘billion.’ Occasionally we have to slum it in the millions, but $21 trillion? That’s a lot – it’s equivalent to the combined size of the US and Japanese economies.

This prodigious sum is held by less than 100,000 people around the world. Unfortunately the writer of this report is not numbered among them and will therefore be back next month...


Higher rate pension savers missing out on tax relief

Monday 20 August 2012

Figures from HMRC show that 55 per cent of the estimated 900,000 higher rate taxpayers in the UK contribute to defined contribution pension schemes.

They have an average salary of £51,580 and make contributions of £425 each month on average. Basic rate 20 per cent tax relief is received automatically at source and is worth £85 on a monthly contribution of £425.

New independent research commissioned by Prudential shows that higher rate taxpayers are losing a collective £296m a year because they fail to claim the additional 20% relief available for them on their pension contributions.

It is estimated that a total of nearly £300m is unclaimed every year in higher-rate tax relief. The average higher rate taxpayer loses £1020 a year because she or he does not claim the relief. The research also showed that fewer than one in five higher rate taxpayers knew whether they had claimed tax relief or not, while only 22% of respondents said they did claim all the pension tax relief they were entitled to.

Members of occupational pension schemes receive basic and higher rate tax relief automatically through their payroll. But members of personal pension schemes, including GPPs (Group Personal Pension Schemes), SIPPs (Self Invested Personal Pensions) and stakeholder pensions, only receive basic rate 20 per cent tax relief automatically. They need to claim the additional relief through their annual tax return or by informing HMRC.

Prudential has stated that if people act before the end of January next year, they can claim for their pension contributions going back as far as the 2010/11 tax year – if they are required to fill in a tax return. Those who don’t need to do a tax return can claim for relief for as far back as the 2008/09 if they act before the end of October 2012.

Matthew Stephens, Prudential’s tax expert, said: “It’s astonishing that so many people fail to claim this valuable tax relief, which could help enormously in meeting the cost of retirement. Surely no one would knowingly turn their nose up at a potential £1,020 extra tax saving?”

The research indicates that a majority of higher rate taxpayers should take immediate steps towards boosting their retirement pot by seeking advice and claiming their entitlement. The opportunity may not exist forever – many tax experts feared that higher rate tax relief on pension contributions would be removed in the last Budget and still feel that in the present economic climate any tax relief provision is vulnerable to legislative change.


Is not leaving the nest so bad?

Monday 20 August 2012

The Office for National Statistics revealed last month that there are three million adults between the ages of 20 and 34 living with their parents, 20 per cent up on 1997.

In 2011, one in three men and one in six women aged 20 to 34 were living with their parents. Across the UK, this percentage varies, from 20% in London to 35% in Northern Ireland.

Is it possible that the fledglings are not leaving the nest at all, or are they flying off to strike out on their own, only to return later? The evidence suggests that both possibilities apply.

Young adults who are seeking employment and are not going into higher education, are finding it increasingly hard to gain economically adequate employment that enables them to strike out on their own. Those who do go to university, and later graduate, are also returning to the nest when they find it difficult to gain employment. Increasingly for those going to university, the choice also includes consideration of whether they can study what they want and remain living at home.

It seems that financial pressures are forcing more and more twenty and even thirty-somethings to return home to their parents, sometimes to stay for good. The increase could be down to a number of factors, but it has coincided with a 40% rise in the average house price between 2002 and 2011, and the amounts required for deposits for house purchases growing more than first-time-buyer incomes.

If young adults are facing increasing university fees with earnings that aren’t keeping up with house prices or rents, it’s no surprise that they are finding it difficult to leave home.

There may need to be a significant cultural shift in our society, which it could be argued has been overdue for some time. In many parts of the world, intergenerational family living is the norm, particularly in third-world and developing nations. Maybe many of us are now being forced to return to this way of living because our dependence upon economic prosperity and success has been fuelled by the growth in the asset value of our homes, leaving us with inflated property prices, which increasingly many of us cannot afford.

The Government and the industry are keen to stimulate a growth in house building and ownership. But with house prices so hyper-inflated over all but the last few years, trying to make houses affordable for the next generation of house owners, while prices remain so high, may not be the best way to go.


The Gender Directive is coming

Monday 20 August 2012

After a legal challenge, the European Court of Justice (ECJ) ruled that ‘gender discrimination’ is illegal when deciding how much people pay for their insurance and the income they receive from their pensions when they retire. There are now changes to the UK Equality Act to implement the judgement – the Gender Directive, by the European Court of Justice (ECJ), which removes the ability of insurers to use gender as a factor in pricing policies and determining benefits.

The date of implementation of the ECJ judgement is 21st December 2012. An interesting time for the insurance industry, when you consider that the impact of the Gender Directive is swiftly followed by the implementation of the Financial Services Authorities Retail Distribution Review (RDR) within the financial services industry on 31st December 2012; two major pieces of legislation/regulation over Christmas and the New Year!

HM Treasury has been consulting with the industry and the EU Commission, and has confirmed that the ECJ judgement only applies to new contracts entered into after 21 December 2012. The Commission has also provided specific examples of what is considered a ‘new contract’, and examples of gender-related insurance practices which are compatible with the principle of unisex premiums and benefits. These practices range from the calculation of technical provisions to reinsurance pricing, medical underwriting and targeted marketing.

One of the positive outcomes of the changes could be that insurers become more sophisticated in the ways they assess insurance risks so that rather than making generalisations about how men and women pose differing risks, each person is treated as an individual risk. Until now most consumers have seemed to be generally happy with how insurance is priced but falling into line with the Gender Directive means men and women will now have to be treated equally.

The two areas of insurance cover most frequently identified by commentators, where the impact of the Gender Directive could be significant, are in relation to a decrease in the amount paid by men for life insurance and an increase in car insurance for women as prices are equalised. However the full impact on the price of insurance by the Gender Directive on 21st December 2012, is still not clear as insurance companies are still working out how to deal with the changes, remain profitable and keep their customers.


July market commentary

Thursday 12 July 2012

Following the wholesale falls in May, the last thing stock markets needed on 1st June was weak US jobs data. Unfortunately, that was precisely what arrived and markets around the world fell even further.

However, all the major markets – with one exception – had rallied by the end of the month, helped in large part by victory for New Democracy in the Greek elections and agreement over a bailout for the Spanish and Italian banks.

The notable exception was China, with the market falling by 6.6% in June – one of only a handful of world markets to fall. While the Chinese stock market is up 1% from the start of the year, it is – worryingly – down 24% on a 12 month basis.

For investors with nerves of steel, Spain and Italy’s stock market performance in June matched their march to the finals of Euro 2012, up by 14% and 10% respectively. But the real reward went to those investors with no nerves at all. The Greek stock market, buoyed by the election victory of New Democracy, rose by 20% in June.


There was bad news to start the month for the UK, with the manufacturing sector contracting at its worst rate for three years. The Purchasing Managers’ Index for the sector slumped from 50.2 to 45.9, with anything below 50 generally being held to indicate a contracting sector and a loss of confidence.

This was countered a week later by news that the service sector had expanded in May: in contrast to manufacturing the services PMI was steady at a healthy 53.3.

Figures for May also showed a rise in house prices – albeit only 0.5% – and for a while there was a danger of good news emerging. But Mervyn King, Governor of the Bank of England, managed to calm everyone down by labelling the current crisis “the worst since World War II” and the rest of the month did little to improve sentiment.

Moody’s downgraded 15 of the world’s biggest banks, including RBS, HSBC and Barclays and by the end of the month the banks were in even more trouble with several of them caught out rigging interest rates and effectively over-charging thousands of small and medium sized businesses. By July 2nd, Barclays’ chairman, Marcus Agius, had resigned and chief executive, Bob Diamond, followed suit just 24 hours later. Bizarrely, the task of finding Diamond’s replacement then fell to Agius when the latter was reinstated.

Despite all these woes, the UK stock market performed admirably in June, rising by just over 5% to end the month at 5,571 – emphasising that the key factors in June were outside the UK.


As the date of the Greek election neared there was a feeling of real unease throughout Europe. New Democracy and the far-left group Syriza were neck and neck in the polls and financial heavyweights around the world queued up to predict the end of the euro. Or, as the Spanish foreign minister put it, “the sinking of the Titanic.”

In the event, New Democracy won the election with 29.7% of the popular vote – to Syriza’s 26.9% – and a government was formed under Antonis Samaras.

At the end of the month, a summit of Europe’s leaders (yes, another one!) agreed on a bailout package for the Spanish and Italian banks. The cost of long term borrowing – which the Spanish government had described as “unsustainable” when it reached 7% – fell back and, for the time being at least, there is no crisis on the horizon.

Significantly, Angela Merkel seemed to soften her hard line on austerity at this summit, which may be an inevitable reflection of the swing to the left in France.

The strong performance of the stock markets in Spain, Italy and Greece has already been noted. Germany’s DAX index was also up – although by a much smaller percentage – the index rose by just over 2% to finish at 6,416.


Despite the month starting so badly for the US stock market, by the end of the month the market had rallied decisively and was back up to 12,880 – once again within touching distance of the psychologically important 13,000 barrier.

Inflation remains low in the US – at 2.3% – and there was also good news with the April figures confirming a narrowing in the trade deficit to “only” $50bn for the month.

Despite the fact that this equates to a $1tn of debt every 20 months the US stock market seems happy to ignore the deficit, and with the Federal Reserve extending its stimulus package (in order to keep short term borrowing costs low), most commentators were generally in a good mood.

The same couldn’t be said for the Republicans when the Patient Protection and Affordable Care Act – more generally known as Obamacare – was declared constitutional by the US Supreme Court (ironically headed by an appointee of George W Bush). This move – seen as outright Government coercion by the Right – brought a spike in donations to Mitt Romney’s election campaign. Obama remains the favourite for the November election, but it is going to be close.

Far East

As above, the Chinese stock market fell significantly in June. It was confirmed that China’s GDP was at a three year low for the first quarter of the year, and even the continuing trade surplus ($18.7bn in April) and a fall in inflation to 3%, couldn’t overcome this bad news.

Japanese inflation was even lower at 0.4% and GDP growth for the first quarter of the year was revised upwards to 1.2%. The most significant news though was a surge in Japanese exports – up 10% in May – as deliveries to the US (mainly of cars) leapt 38%. Exports to China also rose.

The Japanese stock market ended the month at 9,007 for a rise of 5.4%. Hong Kong was also up – 4.3% higher at 19,441.

Emerging Markets

The two biggest emerging markets – India and Russia – both saw good gains in June rising by 7.8% and 8.2% respectively. The Australian economy is expanding more quickly than had been expected but the stock market was virtually unchanged in the month. Greece was the biggest winner of the month and the Turkish stock market also posted a rise in excess of 10%.

Despite this rise, though, Greece remains the worst performing market on a year to date basis and is joined in the bottom five by Spain, Italy, Portugal and Argentina. Perennial star performer Venezuela is far and away the best-performing market with a 68% rise in 2012, followed by the Philippines and Thailand.

And finally…

Despite the economic crisis, the repeated cries of doom and gloom and the dire warnings of the Spanish foreign minister, there is one ‘Titanic’ which appears totally unsinkable – the English Premier League. Rights for the next three years were sold for £3bn, an increase of 71% on the previous package. Those of you wondering how your favourite player is going to finance his next Ferrari need worry no longer...


The morality of avoiding or evading taxation

Thursday 12 July 2012

What a window of opportunity for the British taxpayer and ‘non-taxpayer’ to reflect on their perceptions of the morality of people in the UK who avoid or evade paying tax!

A widely-held traditional British view of tax evasion and tax avoidance has been clear – tax evasion is illegal, while tax avoidance is legal. In this long established view, there is a belief that while tax evasion was clearly wrong, there was something laudable about tax avoidance because, after all, “no one wanted to pay more tax than they needed to”. This view is being battered by a growing swell of public outcry, as tax evasion and tax avoidance are put together in the same sin bin.

A drive against tax avoidance schemes by HMRC, was one of the high profile measures in the Budget in March 2012, but what has grabbed the public interest so much recently is the highlighting of tax avoidance schemes, by the outing of a small number of tax avoiders and the speculation about how many others might be engaged in this activity. In particular the outing of comedian Jimmy Carr, as a tax avoider by the Prime Minister, has stirred up the country.

At the time, on his Channel 4 programme ‘8 Out of 10 Cats’, host Jimmy Carr shamefacedly apologised for his use of the K2 scheme. The show’s ratings nearly doubled to its highest in two years and lifted Channel 4 into a top three position on the Friday evening’s viewing figures! Mocking the host’s tax arrangements, panellist Sean Lock said:

“We all like to put a bit of money away for a rainy day, don’t we? But I think you’re more prepared than Noah.”

Inevitably there is a question – was Jimmy Carr so abjectly apologetic because he felt guilty or because he had been found out and needed to recover his popularity with the viewing public? Some of the media commentators felt that the Prime Minister had not ‘played fair’ in identifying Jimmy Carr, whilst suspiciously keeping quiet about a number of other celebrity tax avoiders. Maybe so but to some extent the cat is now well and truly out of the bag!

Increasingly, tax avoidance and tax evasion seem to be regarded by many people as morally unacceptable and corrupt. What has stirred public anger is the sense of scale. When many people are facing public spending cuts, job losses, benefit cuts, business failure, tax increases and austerity, it sticks in the craw to find that the rich and famous can apparently flout tax liabilities. The long-held view that tax avoidance was not morally wrong, but was rather a sensible behaviour, is rapidly losing credibility.

When illustrating tax avoidance, examples such as taking advantage of the allowances available through pension plans, ISAs and duty free imports to defend the morality of tax avoidance, seems to be avoiding the issue. Such opportunities are open and available to any tax-compliant taxpayer, within the law.

The national perception of tax avoidance is shifting towards one that is about tax evasion by the rich. This is not surprising – recently, ordinary people have been fed a continuing train of perceived wrongdoings – MP’s expenses; ‘cash for questions’; bankers pay and bonuses; bank rate manipulation and corporation tax avoidance arrangements. It may be that increasingly in our materialist-capitalist world, profitability and morality are in danger of being seen as mutually exclusive commodities.

It seems obvious that the current sense of public anger is not going to disappear: indeed, it is likely to grow. That being the case, high-profile figures may want to consider moving more towards tax compliance than tax avoidance when arranging tax planning.


Workplace pensions - progress towards AE and NEST

Thursday 12 July 2012

The eighth report of the Parliamentary Work and Pensions Select Committee, published in May 2012, focused on Automatic Enrolment (AE) in workplace pensions and the National Employment Savings Trust (NEST). There were a number of concerns and recommendations identified with implications for employers in the context of AE and NEST.

The Committee recognised that auto-enrolment would create new costs and administrative requirements for employers at a time of economic uncertainty and commended a flexible and gradual implementation process with employers’ needs in mind.

Equally the requirement to re-enrol individuals every three years was recognised as having administrative and cost implications for employers, although this was perceived as necessary to ensure high levels of participation in workplace pension saving. Given the concerns that employers’ representatives have expressed about the administrative implications of auto-enrolment, the Committee believed that it was important that The Pensions Regulator (TPR) takes the steps necessary to ensure that payroll providers are supporting employers towards a smooth transition to the new arrangements.

While understanding the calls from employers’ representatives for some exemptions to auto-enrolment, for example for micro businesses, the Committee believe such concessions would add to the complexity for employers, as well as having detrimental effects for employees.

It also considered that micro businesses and their employees had to date been the hardest group to reach in terms of workplace pension provision. The Committee supported the Government’s decision that auto-enrolment should apply to employers of all sizes.

The Committee saw that ensuring employer compliance was critical to the success of auto-enrolment and the programme could suffer reputational damage if a large number of employers were seen not to be fulfilling their duties.

The resources that the Government should make available for TPR to address non-compliance must reflect emerging evidence on employer awareness and compliance levels, particularly during the implementation phase for medium and smaller employers.

Relying on whistleblowing to identify non-compliance has inherent problems, particularly in respect of small firms, where the fact that a business has only one or two employees will make it impossible for the Pensions Regulator to guarantee anonymity to the person making a complaint. The TPR needed to consider very carefully how it would address this issue and whether it needed to use more proactive methods to check compliance amongst small employers. The Committee recommended that by the end of 2013, TPR provide a written update on its plans for dealing with non-compliance among small and medium employers, drawing on its latest research on employer awareness and preparation.

 The Committee recommended that the Government should also take steps to ensure that HMRC, the Health & Safety Executive and other relevant enforcement bodies would work closely with TPR to promote compliance, including sharing relevant information where employers are found to be in breach of their auto-enrolment requirements.


Diagnosed health conditions and access to higher pension income

Thursday 12 July 2012

According to MGM Advantage, in a study conducted by Research Plus with 2,086 UK adults aged 55+ (published in December 2011), 60% of people aged 55 and over have received medical treatment for conditions which would qualify them for an enhanced annuity, and yet 72% are unaware that certain lifestyle or medical conditions could qualify them for a better retirement income. In simple terms, reduced life expectancy can unlock the potential for greater yearly pension income.

It is suggested that only small numbers of older adults with diagnosed medical conditions are aware that they can increase their pension income. Despite as many as 70% of retirees potentially qualifying, ABI Market data for 2011 shows that while in the advised market, enhanced annuities accounted for nearly 41% of sales by premium, enhanced annuities accounted for only 2% in the non-advised market.

Over 60% of the over 55s surveyed admitted to some form of illness which could qualify them for a better income. In the MGM Retirement Nation report, findings showed medical conditions experienced by the over 55s which could qualify individuals for a better annuity rate through an enhanced quote, including:

  •     40% of the over 55s have suffered or currently have high blood pressure;
  •     33% of the over 55s have or have had high cholesterol;
  •     12% require treatment for diabetes;
  •     Other qualifying medical conditions include: Heart disease – 8%; Chronic Obstructive Pulmonary Disease – 4%; Heart Attack – 4%; Breast cancer – 3%; Stroke – 2%; Prostate Cancer – 2%.

 According to MGM, all of these conditions could qualify individuals for a better retirement income through an enhanced annuity, with as many as 70% of retirees potentially qualifying. Enhanced annuities factor in medical and lifestyle conditions when calculating the rate of income available and the difference between standard and enhanced rates can be significant.

This was illustrated in an example drawn from the MGM Advantage product portfolio – where a healthy man, aged 65, with a £100,000 pension fund could receive £6,106 a year income. If this man was a smoker with high blood pressure, the annual income would increase to £7,115. If the same man had diabetes with high blood pressure and high cholesterol, his annual income would increase to £7,843.


June market commentary

Tuesday 19 June 2012

There’s an old stock market adage which says “Sell in May and go away.” This year, “Sell before May and go as far away as possible” might have been more appropriate, as world stock markets tumbled throughout the month. Only one market – Malaysia – managed a gain in the month and several recorded double digit falls.

To no-one’s surprise Greece was the biggest culprit, with the market falling 30% to 485. Spain slumped a further 13% as fears about a possible bailout continued to grow, with the stock market finishing just above the psychologically important 6,000 barrier. The Spanish market is now down 30% on a year-to-date basis.

May was the month when the financial crisis in Europe gave us another new word: ‘Grexit’ – a Greek exit from the euro. The term was coined after the May election results saw the pro-austerity coalition lose its majority. Prior to this month’s election, one US hedge fund manager speculated that the Grexit could happen as early as July, with Alexis Tsipras, the leader of Greece’s far-left coalition,  saying the terms of the recent bailout deal were “null and void.”

May also saw Francois Hollande replace Nicolas Sarkozy as French President – Sarkozy becoming the 11th European leader to lose an election since the crisis began. In the UK the local council elections saw sweeping gains for the opposition as Labour captured 39% of the vote.

“The politics of austerity have suffered a humiliating defeat” was a comment made on the Greek election: it could equally have been applied to the results in France and the UK.


If it hadn’t been for the local election results May would have started reasonably well for David Cameron, with the CBI forecasting that Britain would return to growth in the second half of the year and the number of unemployed falling to 2.63 million.

Unfortunately, Clinton Cards then went into administration, putting 3,500 jobs at risk and it was confirmed that the wet April had hit retail sales hard, with a drop of 3.3% on the previous month. With the rain continuing it is doubtful if the May figures will show much improvement.

One of the more worrying reports was in the Times, who highlighted findings from the Centre for Economics and Business Research. They warned that those areas of the UK heavily dependent on the public sector would “feel the pain” for the next five years as the public sector continued to be squeezed. The North East of England, Northern Ireland, Wales and Scotland would be particularly badly hit.

Like virtually all the major stock markets the UK fell sharply in May, buffeted by fears about Europe in general and Spanish banks in particular. The FTSE closed at 5,306 – down 7.5% on the month. It was also confirmed that house prices had fallen back in April, with the BBC reporting that the housing market was “now in gentle decline.”


While the political crisis in Greece grabbed the headlines in Europe, perhaps the most worrying developments were in Spain, where many banks now appear to be in real trouble. The Bank of Spain reported that the problem property loans of all Spanish banks totalled €184bn at the end of 2011 – equal to 60% of all property loans. This is not something which will be solved quickly or easily.

Most commentators now seem to accept that the euro cannot continue in its current form, but with the cost of the break-up being put at between €300bn and €1tn everyone is anxious that if there are to be changes, they should be as orderly as possible. Whether events in Greece and Spain will allow this is open to doubt.

When you factor in the different approaches to the crisis favoured by Angela Merkel and Francois Hollande, there is little doubt that the uncertainty in Europe is going to continue through the summer.

This was perhaps reflected in Germany where Lufthansa announced plans to shed 3,500 jobs. The German stock market was down nearly 8% by the end of the month, finishing at 6,264. However, it remains up on a year-to-date basis.

All the other major European markets fell during the month. The performance of Greece and Spain has already been noted – and with its stock market falling by nearly 13% in the month, it is difficult not to think that Portugal could be the next country into intensive care.

United States

The much anticipated stock market floatation of Facebook finally happened in May – and immediately ran into trouble. The initial floatation price put a value of over $100bn on the company, which drew scorn from many seasoned observers, one of whom described the shares as ‘muppet bait.’ By the end of the month the shares had fallen to $27, making the company worth a paltry $57bn.

Warren Buffet added his voice to the scepticism and instead spent $142m of loose change on buying 63 local newspapers.

It was at least a good month for Mitt Romney, who finally clinched the Republican nomination and will face President Obama in November. Opinion polls still have Obama in the lead but the race will be tight and bad economic news could tilt the balance in Romney’s favour.

At the moment though, the economic news from the US favours the President. Although the trade gap widened in March, inflation continues to fall and the US GDP rose 2.2% in the first quarter. However the stock market was not immune to the worries coming out of Europe, and the Dow fell by just over 6% in the month, finishing May at 12,393.

The Far East

‘China heading for a well needed crash,’ screamed the Money Week headline on May 21st. Yes, there are warning signs in China and – unsurprisingly given the current world economic climate – both imports and exports have slowed. But when the definition of ‘slowing’ is that exports only rose by 5% in the year, and the country is posting a $19bn trade surplus in the month, you have to think that a lot of Western governments would give their right arm for such a ‘crash.’

Conversely the trade gap widened in Japan as more fossil fuels were imported and exports of steel and plastics reduced – largely due to lower demand from China. In what might be an encouraging long term trend for the Japanese economy, bank shares rose as the demand for corporate borrowing increased.

Both the Japanese and Hong Kong markets fell during May – Japan was down just over 10% to close the month at 8,543 and the Hong Kong market recorded a fall of over 11% to 18,630. China, however, was virtually unchanged with the market finishing the month at 2,385.

Emerging Economies

All the emerging economies around the world fell in May (with the honourable exception of Malaysia). Even the rock star stock market that is Venezuela couldn’t buck the trend, although it remains a healthy 105% up on a year to date basis.

Worryingly though, Brazil, India and Russia all recorded double-digit falls for May, with the Russian stock market tumbling by nearly 20% to close at 1,282. The BRIC countries (Brazil, Russia, India, China) are theoretically the main drivers of growth in the developing world, so it will be interesting to see what happens in June.

And finally

Clearly May was a difficult month – and yet it was a month which saw Edvard Munch’s iconic painting ‘The Scream’ sold for £74m. Andy Warhol’s ‘Double Elvis’ fetched $37m and a Mark Rothko painting went for $86.9m. It was revealed that head of the IMF, Christine Lagarde, pays no tax on her £300,000 annual salary – perhaps not able to afford a painting yet, but clearly moving in the right direction.

It was also revealed that wages for Premiership footballers are at a new high, with Manchester City spending 114% of their income on wages. Some pundits were reminded of the Greek railway system, which famously took £80m a year in ticket sales and spent £500m on salaries. I think that’s where we came in…


What the uncertainty in Europe means for your financial planning

Tuesday 19 June 2012

The Greek people recently returned to the polls, following the uncertainty caused by the lack of a definite result in the May elections. Much has been made of the possibility of Greece leaving the euro – the ‘Grexit’ as it has been dubbed. European leaders don’t want Greece to leave as they fear the consequent upheaval and the possibility of Spain, Portugal or Ireland following Greece out of the door. But the Greek people don’t appear to want to accept the austerity measures Europe is proposing.

What does all this upheaval and confusion mean for your financial planning? You might be forgiven for thinking that the only sensible course of action is to live for today. Spend all your money because there doesn’t seem to be much point saving or investing any more.

Sadly, certain events are not going to be affected by what happens in Greece:

  • You’re still going to get older
  • There’s still going to be a time when you’re not able to work
  • If you have children, they’re still going to need educating
  • Your mortgage will still need paying

So tempting as it may be to pull the covers over your head and hope that the problems will just go away, there is still a need for financial planning. In fact, the crisis in Greece and the uncertainty in Europe make financial planning much more, not less, important.

Above all, this is where a good independent financial adviser comes into his or her own. As someone once said, “In times like these it helps to remember that there have always been times like these.” Whether it was the South Sea Bubble, the Wall Street Crash or the more recent banking crisis, economics – and the performance of stock markets – has always been cyclical. Markets rise and fall, and always will do.

That’s why working consistently with your IFA is so important. It’s easy to get depressed by short term falls and think the best place for your money really is the mattress but your financial adviser will be able to suggest ways in which your savings or investments can be protected against sudden falls in stock markets.

He’ll also know that just because Europe is struggling, it doesn’t necessarily mean the same is true for the rest of the world. Over the past few years, there have been excellent returns from markets in the Far East and Latin America, and your IFA will be aware of funds and fund managers that have performed well in these areas.

So while the current uncertainty in Europe is a worry, it is not the end of the world and sadly, it won’t stop any of us getting older. Life goes on and your need for good, consistent financial planning doesn’t change. By working with your IFA and having regular meetings to review the progress and performance of your investments and savings, you can make sure that short term uncertainties don’t damage your long term financial wellbeing.


How much life cover do I need?

Tuesday 19 June 2012

With the recession showing no sign of abating and economic prospects about as gloomy as they’ve ever been – to say nothing of the chaos in Europe – we’re all worrying about money and, in particular, how we can save money.

You wouldn’t be human if you didn’t run your eye down your bank statement, see the name of an insurance company and think, ‘Is that what I’m paying for life cover? Do I really need to spend that amount? After all, I’m feeling fine…’

My client Roy was feeling fine as well. Everything in the garden was rosy: he had a successful carpet business which he was going to sell in a few years’ time. By then his children would have left home: Roy and Denise were going to buy a mobile home and travel round Europe. “Exactly what I should have done thirty years ago,” he told me.

One Friday night Roy went to the pub. It had been a stressful week – some suppliers hadn’t delivered on a big contract – and he needed a drink. He needed to unwind. Unfortunately, Roy had a heart attack. He died on his way to hospital.

Roy was in his mid-fifties – but as anyone who follows football will know, heart problems can strike the fittest people at any age. And we all know someone who’s had cancer, or someone who’s been in a car accident.

Yes, it can be tempting to think you don’t need your protection policies – but dying without life cover in place can have a devastating effect on those you leave behind. So how much life cover do you need?

In the old days it was simple: your insurance agent would cycle round and tell you that between ten and twenty times salary was the ideal figure for life cover. Today, it’s slightly more complicated, especially as many of us have death-in-service benefits and/or partners that work. But everyone needs to make sure that their mortgage is covered; that their children’s educational needs – school or university – are provided for and that bills and funeral expenses are taken care of.

This is where a relationship with a good independent financial adviser comes into its own. Working these sums out for yourself can be a painstaking and depressing business. Your IFA will not only be able to do the calculations for you (and take things like death-in-service benefits into account) he or she will also be able to find you the most cost-effective cover. In addition, he’ll advise you on other specialist considerations. For example, does your life cover need writing in trust for your dependants?

You may also be pleasantly surprised: life cover is not as expensive as many people think and it’s often the case that clients are paying more than they need to. Rates have fallen over the past few years and many existing policies could now be replaced with more economical ones.

Sadly none of us know what’s round the corner: but speaking to your IFA can at least guarantee that if the worst happens your dependants will be financially secure.

As always, we’ll be happy to discuss all aspects of your life cover with you, answer your questions and, if necessary, provide you with illustrative figures.


Can you survive an unexpected loss of income?

Tuesday 19 June 2012

One in three (33%) of us are spending more than our salary or are just about managing to break even each month, according to Bright Grey’s Financial Safety Net report, from a study carried out by Opinium Research.  Evidence was gathered from interviews carried out online among 2,016 nationally representative British adults, between 31 January and 3 February 2012.

The study found that over 11 million British adults (23%) just about match their outgoings to their net monthly salary, with nothing left over at the end of the month. Worryingly, 4.9 million (10%) said that they spend more than their salary on a regular basis.

The concern identified by Bright Grey is that the findings show that the average consumer spending £1,315 a month, spends only £30 on protection insurance products towards providing a financial safety net.

This compares to £56 on telephone bills and a huge £232 on supermarket and other shopping. In terms of large ‘one-off’ products and services, adults in Britain spend an average of £885 on holidays a year, £214 on big ticket electrical goods such as TVs, cameras and iPods over the same period and £151 on white goods such as fridges and freezers.

According to the Safety Net Report, 41% of adults would be unable to maintain their current lifestyle beyond September 2012 if they had to live off any savings or ‘emergency’ funds, with respondents saying they would only be able to rely on savings, borrow from friends and family, or rely on credit, for up to six months in a financial emergency.

This number is five times greater than the figure identified in the 2010 Safety Net Report. Then, the findings indicated that just over 4 million adults would run out of money after 6 months. A typical adult in 2012 thinks they can use savings, loans or financial help from friends and family for an average of 290 days. This is a decrease of around a month from those that felt they could manage from savings and borrowing, a year ago.

The study also showed that nearly half (43%) of respondents say they have £1,000 or less in savings that they could access immediately, with nearly a quarter surveyed (23%) having no money saved at all. Should the main breadwinner be diagnosed with a serious illness, suffer a disability or die, 1 in 4 (24%) adults said that they would need to cut back drastically on their living costs in order to maintain their current standard of living. The same number (24%) said that they would not know what to do in this eventuality. Over 1 in 10 (11%) of those surveyed said they would have to sell their house.


May Market Commentary

Thursday 17 May 2012

Wednesday April 25th must have been the morning David Cameron felt like phoning in sick. The Office of National Statistics officially confirmed that a shock 0.2% contraction in growth had pushed the UK into its first double dip recession since the 1970s. Meanwhile the Leveson Inquiry rumbled on with Culture Secretary Jeremy Hunt facing calls to resign; Labour opened an eight point lead in the opinion polls and there were predictions that the increase in diabetes could bankrupt the NHS. All in all a good day for a sick note…

The situation in Europe was not much better. Spain looked increasingly jittery as the Government admitted that the country’s debt would jump to a 20 year high, with a debt-to-GDP ratio of 79.8%. To compound matters, much of the debt of the Spanish regions was downgraded to junk. The eurozone crisis claimed its latest victim when the Dutch Government of Mark Rutte collapsed over disagreements about the inevitable cuts.

Stock markets around the world were volatile throughout April – and yet surprisingly many markets finished the month little changed overall.

In the US Facebook paid $1bn for Instagram – a company that has never made a profit – whilst Warren Buffet invested $2bn in a solar energy plant that will supply electricity to large parts of California for the foreseeable future. Time will tell who made the better investment…


Despite his troubles by the month-end, April started well for David Cameron. The Purchasing Managers’ Index for March showed an increase on the February figure and this is usually taken as a positive sign for the economy. The rise – from 53.8 to 55.3 – was hailed as clear evidence that the worst was over and that the UK would avoid a double-dip recession.

Unfortunately, there was always bad news lurking round the corner and despite the efforts of Mary Portas to revive the High Street, Deloittes reported that retail failures had cost 10,000 jobs in the first quarter of the year. Like-for-like sales for the first quarter were down at Marks & Spencer (they described the current outlook as “challenging”) and Tesco saw their profits fall for the first time in 20 years.

But the UK retail situation may not be as gloomy as the big battalions would have us believe. Whitbread reported continuing growth in its Costa and Premier Inns chains, and Starbucks confirmed an eleventh consecutive quarter of growth in the UK. Perhaps more significantly, the British Independent Retailers Association said that independent shops had net openings of over 2,500 shops in 2011 – the equivalent of ten small towns worth of new shops. BIRA claimed that ‘independent shops are saving our towns on their own.’

The March figures showed that UK inflation rose slightly, reaching 3.5% and the final figures for February also confirmed that the trade deficit had worsened to £3.4bn. Nationwide reported that house prices fell by 1% in March, with UK prices now generally 0.9% lower than they were a year ago. The price of a typical home is now £163,327.

Despite the bad news, and the threat of further uncertainty ahead, the FTSE finished the month virtually unchanged at 5,738 – down 30 points from the end of March.


 Europe in April was the now traditional mix of doom, gloom and credit downgrades. Spain was again the main whipping boy, and several of the country’s regions are now paying interest rates on their debt that is described as “impossible.” There are genuine fears of a domino effect within Spain itself, with worries that one region could turn to Madrid for help with its finances as early as May.

 The yield on the country’s 10-year government bonds hit 6.1%, the highest since December. Standard & Poor’s downgraded Spain’s credit rating to BBB+ and warned that the recession in Spain was likely to deepen by the end of the year. With unemployment at around 25% and fears that the Spanish banks may require a €120bn bailout, it was hardly surprising that the country’s Ibex 35-share index fell to 7,011 – down 12.45% on the month.

 (To put Spanish unemployment in perspective, the only countries reporting higher levels of unemployment are Rwanda, Angola, Macedonia and Namibia.)

 Both the French and German stock markets retreated in April, with Germany’s DAX index down just over 2% at 6,801. It will be interesting to see the reaction if Francois Hollande defeats President Sarkozy.


 In the US, April was a good month for Mitt Romney as Rick Santorum finally pulled out of the Republican race, leaving the way clear for Romney to challenge President Obama in November.

 For Wal-Mart however, April proved to be a very bad month as they became mired in bribery allegations at a Mexican subsidiary. Lawyers rubbed their hands and announced that the firm would face a “two to four year investigation” under the Foreign Corrupt Practices Act. Subsidiary companies (including Asda) in all countries came under scrutiny and, not surprisingly, Wal-Mart shares tumbled.

 The economic indicators were largely positive for the US: the March figures confirmed that another 120,000 jobs had been added; inflation fell to 2.7% and when the numbers were finally crunched for February’s trade deficit, the good news was that it had fallen to $46bn.

 US GDP rose by 2.2% in the first quarter and consumer spending also rose as some commentators suggested that the US had benefitted from not going down the austerity-at-all-costs route favoured in Europe. As Philip Inman put it in the Guardian, “Ultimately the US cared less about its AAA rating than about jobs and living standards, saving austerity for a time when the economy is stronger.”

 The Dow Jones index finished the month at 13,214 – up precisely two points on the end of March figure.

 Far East

 China yet again increased its holding of US debt, buying $12.7bn of US bonds. According to the BBC, China now holds $1.17tn of US debt and continues to be the largest foreign buyer.

 Significantly China had an unexpected trade surplus in March which many experts suggest heralds a rebound in the global economy. Exports rose by 8.9% from the same month last year while imports rose 5.3%, to give the country a $5.4bn surplus for the month.

 China’s inflation rate rose to 3.6% in March (including food price inflation of 7.5%) and the economy continued to expand at a rate countries in the west can only dream about.

 After a trade surplus in March, Japan swung back into deficit in April, with energy imports outweighing car exports.

 Both the Chinese stock market and Hong Kong’s Hang Seng index rose during the month, but the Japanese market fell back 5% to finish at 9,521, perhaps weighed down by worries about the high level of energy imports.

 Emerging Markets

 Emerging Markets can always be relied on to provide a heady mix of the astonishingly good and the downright frightening – sometimes within the same economy.

 So while the UK and Europe worry about negative growth, some emerging economies are recording double digit year-on-year GDP growth, with particularly strong performance in many African countries. Even relatively ‘mature’ emerging countries such as Turkey and India have achieved growth of 5% and above.

 The stock market phenomenon which is Venezuela has been well documented in this bulletin: the market rose another 30% in April, but Venezuela also tops the league tables for inflation, with a current rate of 24.6%, and interest rates are in excess of 15%. Something has to give at some point.

 Brazil is often heralded as a success story and clearly there is going to be major investment in the run-up to the 2014 World Cup. But potential investors should note that the country has interest rates at 9% and inflation in excess of 5% – a not uncommon picture in emerging economies. The Brazilian stock market fell back by 5% in April, but remains up on a year-to-date basis. Among other stock markets Thailand was the star performer, rising by 16% during April.

 And finally…

 As you look forward to two days off in June courtesy of Whitsuntide and the Diamond Jubilee, dark forces may be at work.

 The Centre for Economics and Business Research has called for all UK bank holidays to be scrapped, saying it would add £19bn to the country’s total economy. Each bank holiday apparently costs £2.3bn in lost output.

 The phrase ‘get a life’ comes to mind…


Financial Planning and Divorce

Thursday 17 May 2012

No-one who is going through a divorce finds the process easy: it’s long, messy and almost always painful. Even if there are no children involved, divorce is a procedure that takes its toll on both sides: the acrimony, the paperwork – and the inevitable meetings with your solicitor.

It’s understandable that many people involved in a divorce want to minimise the number of meetings they attend and simply let the solicitors get on with sorting it out.

Unfortunately, trying to cut down on meetings could be a serious mistake. Divorces are not just about broken relationships, dividing up the family home and arranging custody of the children. Sadly, they’re about financial planning as well – and meetings with your independent financial adviser may turn out to be even more important than meetings with your solicitor.

Even if a couple have only been married for a relatively short time their financial affairs are likely to be inextricably linked. The mortgage will almost certainly be in joint names; they could well have shared protection policies and pension benefits may need taking into account when assets are divided.

Couples who have been together for longer – and an increasing number of people are now getting divorced in later life – will find the financial situation even more complex. Pensions will certainly be an area that requires specialist financial advice as some people, particularly high-earners in final salary pension schemes, will have built up pension funds which could well be worth more than the family home.

The new rules on pensions sharing in divorce have introduced a variety of options when it comes to dividing accumulated pension funds: they have also introduced the need for some seriously complicated (and potentially contentious) calculations, making expert advice absolutely essential.

All these areas mean independent financial advice can be crucial to making sure that any financial ‘damage’ you suffer as a result of a divorce is kept to a minimum, and that you emerge with a clear idea of the financial planning steps you need to take in the aftermath of the divorce.

Virtually no-one relishes going through divorce proceedings, but if you find yourself in that position, seeking out independent financial advice will be one of the wisest decisions you make. A good IFA will help make sure that you receive the best possible financial ‘result’ from the divorce and will work with your solicitor to see that everything runs as smoothly and painlessly as possible. Whether it’s helping to sort out the mortgage, reaching an equitable settlement of pension assets or any of the other complications that a divorce can throw up, an IFA will be on your side, constantly giving advice with your best interests at heart.

If you are – or fear that you might become – involved in divorce proceedings then please don’t hesitate to contact us. We’ll provide you with expert and wholly confidential advice – and do our best to make sure that the financial pain of your divorce is kept to an absolute minimum.


Green shoots for business?

Thursday 17 May 2012

Since the beginning of 2012, the Government has sought to encourage entrepreneurs and business development, announcing measures including more red-tape cutting, making borrowing easier, providing support and tax incentives. Against this, the tide of recession seems not to have turned, with recent figures suggesting shrinkage of double-dip proportions rather than growth.

In January, an Aviva report on the small and medium sized business (SME) sector, indicated that a significant proportion of small and medium-sized business owners were losing their enthusiasm and entrepreneurial drive, with 25% thinking of returning to work and 50% saying it is too tough to be a business owner in the current climate.

Aviva reported that a reduction in the money taken out of their own businesses for personal use may be a contributing factor, with half of those (50%) surveyed having reduced the money they draw over the past two years. Restaurant owners appeared to have suffered the biggest fall. Nearly three-quarters (73%) of those with businesses in the catering sector have seen a marked decline in the amount they withdraw from their business, with almost a third (29%) reporting a drop of between 20-25% and 10% reporting a drop of up to 50%. Half of those surveyed had not asked for funds from the bank.

The survey recorded that SMEs had experienced a tough end to 2011. Nearly half (43%) said 2011 was tougher than expected, an increase since June 2011 when over one third (37%) expressed this opinion. 50% of independent retailers and shop keepers questioned, said that 2011 was tougher than expected – the highest of any business sector surveyed. In January, than one in three (35%) believed that there was an increasing risk of an economic “double dip” recession, compared with 28% when Aviva asked the same question in June 2011.

A quarter of businesses (26%) expected the first half of the year to be difficult as people curbed their spending, with 24% of those surveyed expecting a decline in sales. Less than one in ten (7%) expected good sales in the first six months of 2012.

So now that we have had the 2012 Spring Budget and a variety of legislative reforms and measures coming through, the Finance Bill etc, is the SME sector feeling any better? Is an entrepreneurial spirit returning with late spring and early summer? Where are the green shoots? Do things look better now and will small businesses be lifted and entrepreneurs heartened and re-energised by the Queen’s Jubilee and the London Olympics? We can only wait and watch…


Can you 'trust' your Life Assurance policy?

Thursday 17 May 2012

According to some estimates, as few as 6% of life assurance policies in the UK are currently written in the form of a trust, although doing this can be advantageous.

Clients should always consider whether a new policy needs to be written in trust and a review of any other existing policies might reveal how those could be made more beneficial. Many people may accumulate several life assurance policies, each one written for a purpose, but once written, just allowed to run.

The opportunity to review life assurance policies is an important aspect of any financial health check, when the possibility of putting life assurance policies into trust should not be overlooked.

What are the financial planning advantages to writing life assurance policies in trust? There can be three key benefits:

  1. On death, policies held in trust are paid out without having to await probate, so dependants get the benefits straight away.
  2. The policy proceeds do not add to the estate for inheritance purposes, thus avoiding paying tax unnecessarily.
  3. The client has control over who is to receive the benefits.

Trusts might seem complicated, but with advice are relatively simple to negotiate and understand.

The first thing to remember with any trust arrangement is that three groups of people become involved – the settlors, the trustees and the beneficiaries. The settlor is the client who is putting their policy into trust. The trustees are the legal owners of the trust property and are responsible for managing the trust according to its rules. The beneficiaries are those that are to receive the benefits from the policy.

The second aspect to consider is what type of trust to use. Again advice is helpful when considering and choosing trust options. Commonly there are three types of trust used with life assurance protection – a bare trust, a discretionary trust and split trusts, offering choices in terms of how the client wants to plan their financial future and provision.

So if you are thinking about taking out a life assurance policy, think about it being in trust and it’s not a case of just setting up your policy and leaving it. Be concerned to review your policy holdings and make sure that you paying for the best possible coverage and outcomes.

If you want to find out more about your life assurance cover, contact one of the team who will be happy.


April market commentary

Wednesday 11 April 2012

March was a month which began with headlines about the Greek debt crisis and the impending -final deadline.- By the end of the month the focus - in Britain at least - had shifted to Granny Tax, Cornish Pasties and the shortage of petrol.

On March 7th world stock markets suffered some of their worst falls of recent months as investors worried that the Greek bail-out would not be accepted. In the event the necessary thresholds were met quite comfortably, but sadly this didn't signal the end of the global economic malaise.

Once the euphoria had died down - and that happened remarkably quickly - reality set in with investors and commentators alike acknowledging that the road ahead would be long and bumpy and that there were plenty more potential crises around the corner.


If a week is a long time in politics, then in March a month was an eternity for the British economy. It began with the FTSE within sight of the 6,000 level and Nissan announcing plans to create 400 new jobs with a compact car plant in Sunderland. With a further 1,600 jobs expected to be created in the supply chain this was one the Government could definitely file under 'good news.'

Unfortunately petrol reached a record high around the same time and it was then downhill all the way.

There was bad news for UK homeowners, with the Halifax announcing that mortgage rates would rise on May 1st with the base mortgage rate increasing from 3.50% to 3.99% - an increase of 14%. Other lenders were not slow to follow suit and the gloom was compounded a few days later when the Halifax confirmed that house prices had fallen by 1.1% in February. By the end of the month lenders were talking about stricter lending criteria, and house prices fell again as the stamp duty holiday ended.

The response to George Osborne's budget was lukewarm at best, with several of the measures coming in for criticism and 'Granny Tax' trending on Twitter before the Chancellor had even finished speaking. The top rate of tax was cut from 50p to 45p but with tax allowances for pensioners being frozen, it was hardly surprising that the Budget was derided as one that 'picked the pocket of pensioners.'

However, it was in the final week of the month that it went seriously wrong for the Government, as motorists queued for petrol in the face of a threatened tanker drivers' strike. The Government also faced the possibility of a 'bakers' march' with a groundswell of opposition to plans to impose VAT on hot, savoury food. When the full weight of the Government spin machine is used to tell the nation how much the Prime Minister likes Cornish Pasties you know that events, dear boy are not quite going to plan.

The British Chamber of Commerce cut its forecast for output growth; the retail sector continued to struggle and the OECD claimed that Britain was back in recession. Unsurprisingly, the FTSE struggled to make any ground through March, and ended the month down just under 2% at 5,768.


With Greece having been 'saved' - for now at least - the focus in Europe switched to the other countries that were deemed to be in trouble. Spain introduced an austerity budget at the end of the month which it claimed would save ¬27bn, but like last months tough measures in Greece it was greeted with civil unrest.

However, markets were buoyed by the European finance ministers agreeing a new ¬500bn bailout fund (which in practice will probably rise to ¬700bn). This is now the firewall on which all hopes are pinned.

Despite these worries the key German DAX index rose again, finishing the month 1.32% up at 6,946. The index has risen by an impressive 17.7% since the start of the year.

Other European markets were mixed, but Spain fell by over 5%. Worryingly, it is the only one of the world's major stock markets to be down on a 'year-to-date' basis, with a fall of 6.52%.


The picture in the US was somewhat confused. As Mitt Romney moved towards the Republican nomination, President Obama saw a further 227,000 jobs added in February. Encouragingly, this was across the whole range of employment sectors and unemployment in the US is now running at 8.3%.

However, the pessimists were quick to point out that the US balance of trade had widened in January, with a goods and services deficit of $52.6bn, up from $50.4bn in December and a three-year high. Given these conflicting signals it was no surprise when the Fed (Federal Reserve Bank) opted to keep US monetary policy unchanged.

The Dow Jones index had started the month within touching distance of the 13,000 mark. Although the performance throughout March was not spectacular, the recent gains were consolidated, with the index finishing at 13,212 for a rise of almost exactly 2%. The Dow Jones index is now up by just over 7% since the start of the year.

Far East

The news from Japan was mostly good in March, with a trade surplus of ¥32.9bn being confirmed for February after four-straight months in deficit. Although Japan's recovery from the world recession and the tsunami is still fragile these are encouraging figures and, not surprisingly, the Bank of Japan left its key monetary policy unchanged.

In China the inflation rate fell to 3.2% - however food price inflation rose to 6.2% which must make life difficult for the average person. There was a worrying story in the BBC news archive about the ghost town of Ordos - a town built for hundreds of thousands of anticipated residents at the start of the Mongolian Coal Rush. Today the town stands derelict and deserted - testimony that not everything in China works out perfectly.

This uncertainty was reflected in the stock market - consistently above 3,000 in 2011, but now down another 3% on the month to finish March at 2,350. If the Chinese Government allows the yuan to float more freely - as has been suggested - then this will presumably make Chinese exports less attractive.

The Hong Kong market also saw big falls in March, declining by over 5% to finish the month at 20,556.

Emerging Markets

Like China, the other 'BRIC' countries, Brazil, Russia and India, all saw their stock markets fall during the month although all are comfortably ahead since the start of the year.

Several other emerging markets posted useful rises, but the stellar performer of the month was once again Venezuela, with the stock market there recording a massive gain of over 30% in March. As we have already seen, The Dog of the Month award - or 'perro del mes' in this case - went to Spain.

And finally...

However your investments performed, March was a remarkably good month for Bob Diamond, the boss of Barclays. He staggered home under the weight of £17m in pay, shares and perks - at a time when the bank's profits fell. Anyone who invested £100 in Barclays in 2006 would now have £29. It's alright for some...


Beware of the dog - the importance of monitoring funds regularly

Wednesday 11 April 2012

If you watch the money programmes on TV or read the financial pages of the newspapers, you might have come across the term 'dog fund.' What does the term mean? And why is it so important to the ordinary investor?

Put simply, a 'dog' is a poorly performing investment fund. Let me explain in more detail.

All investment funds are divided into 'sectors' - for example, UK Growth Funds, which will invest in the shares of UK companies with the aim of producing long term growth. Classifying funds in this way allows meaningful comparisons to be made. Funds can be compared both against each other, and against the average performance of all the funds in the relevant sector. Fund X isn't necessarily a good fund to invest in simply because it has done better than Fund Y - they might both have performed well below the average. However, if Fund X has turned in a performance which has been consistently above average, then it could well be a fund that you'd want to consider.

The trouble is there are funds which have performed well below the average for their sector - and if a fund is consistently 10% below the sector average then it earns the dreaded 'dog' tag. Worryingly, a recent report in the Daily Telegraph - based on an industry survey - highlighted the fact that investors had over £9bn languishing in these 'dog funds.' Included in the list were some well-known names, among them funds managed by Scottish Widows, Standard Life, Schroder and M&G - so if you're invested in a broad spread of funds, it could well be the case that one of more of your funds is on the list. With fund managers continuing to levy their full charges, irrespective of the performance of the fund, there's a real danger that investors are exposing their capital to unnecessary risks by continuing to be invested in these poorly performing funds.

This is one of the reasons why regular meetings with an independent financial adviser are such a good idea. Keeping a close eye on the performance of all your funds will mean that under-performing funds can quickly be identified and, if necessary, changes made to your portfolio.

Poor performance also highlights a key reason why independent advice is so important. It's very easy for an adviser to make any fund look good by presenting you with a glossy sales aid showing its performance against other, well known funds. The trouble is, they could all be poor performers. If you're thinking of investing in a fund, you need to see how it compares against all the funds in its sector - not just a handpicked few. As an IFA is able to advise you on (and recommend) any investment fund, he'll have no qualms about pointing out poor performance and recommending possible changes.

Whilst changing funds may have some immediate cost implications, remaining in a poorly performing fund can ultimately do far more damage to the value of your investment.

If you are worried about the performance of any of the funds in which you are invested - or you would simply like to review your overall investments - then please don't hesitate to contact us.


Guarding against Inheritance Tax biting into your estate

Wednesday 11 April 2012

It is never too early to start planning where Inheritance Tax (IHT) is concerned. At the very least, you should keep a watching brief on the value of assets that could be part of your estate, particularly in relation to the inheritance tax nil-rate band. This has not changed since 2009 and whilst it is set to remain at its current value of £325,000 until 2014-2015, the value of your assets, in the meanwhile, could rise above the nil-rate level.

New legislation is due to take effect from 6 April 2015 that will see the nil rate band rise in line with the Consumer Prices Index (CPI), instead of the higher Retail Prices Index (RPI). This could result in a lower than anticipated rise of the threshold level. This and subsequent changes to the threshold, will almost inevitably result in more people having to pay inheritance tax.

Consumer research from Legal & General about how people prepare for inheritance tax, reveals that although most people (69%) are aware of the potential IHT hit on their hard earned wealth, the majority of those questioned (69%) have taken no action beyond making a will. The top three reasons given by respondents for putting off estate planning are - 'It's too far off for me to consider' (38%) ' 'I keep putting it off' (24%) - 'I don't know where to start' (15%). However, half (50%) of the people questioned (who are under the age of 50) said they would like to learn more about tax mitigation after being shown details of IHT charges.

The research responses also show that people looking for help to minimise inheritance tax seek professional advice or guidance. The top 3 sources consumers ask for advice are IFAs (30%), solicitors (26%) and accountants (13%). The Treasury estimates that in 201516, around 1,500 more estates will have to complete more complex paperwork for HM Revenue and Customs. Of these, more than half - around 900 - will then be liable for IHT and this figure is expected to continue rising.

According to HMRC:

Sometimes, even if your estate is over the threshold, you can pass on assets without having to pay inheritance tax. Examples include:

  • Spouse or civil partner exemption. Your estate usually doesn't owe inheritance tax on anything you leave to a spouse or civil partner who has their permanent home in the UK - nor on gifts you make to them in your lifetime - even if the amount is over the threshold.
  • Charity exemption. Any gifts you make to a 'qualifying' charity - during your lifetime or in your will - will be exempt from inheritance tax.
  • Potentially exempt transfers. If you survive for seven years after making a gift to someone, the gift is generally exempt from inheritance tax, no matter the value.
  • Annual exemption. You can give up to £3,000 away each year, either as a single gift or as several gifts adding up to that amount - you can also use your unused allowance from the previous year but you use the current year's allowance first.
  • Small gift exemption. You can make small gifts of up to £250 to as many individuals as you like, tax-free.
  • Wedding and civil partnership gifts. Gifts to someone getting married or registering a civil partnership are exempt up to a certain amount.
  • Business, Woodland, Heritage and Farm Relief. If the deceased owned a business, farm, woodland or National Heritage property, some relief from inheritance tax may be available.

Repaying Student Loans - how does it work?

Wednesday 11 April 2012

The Student Loans Company (SLC) was set up to undertake the administration and processing involved in the payment of loans and grants to students and the payment of tuition fees for higher and further education services.

The majority of students will have a loan to cover the full cost of tuition fees plus a maintenance loan to cover the cost of living expenses. Everyone on an eligible course qualifies for 72% of the maximum loan, regardless of income, and the rest is income-assessed. These loans are subject to interest at the rate of inflation, on the basis that the amount eventually repaid will have the same real value as the amount borrowed.

SLC undertakes account maintenance and communication with borrowers. For borrowers within the UK tax system, collection is undertaken by HM Revenue & Customs (HMRC) through the PAYE or Self Assessment (SA) processes.

Loans are collected directly by SLC for borrowers outside the UK tax system. Repayment of student loans begins from the April after borrowers finish or leave their higher education course, but only when their income exceeds a certain threshold level. The annual threshold has been set at £15,000 since 6 April 2005. The corresponding monthly threshold is £1,250 and the weekly threshold is £288.

Repayment is collected at 9% of earnings that are above the relevant income threshold. This system of collection is known as Income-Contingent Repayment (ICR), because it tapers the repayment obligation according to the gross income of the account holder. The 9% repayments are unaffected by the rate of interest.

For collection through PAYE, the SLC sends details of borrowers who are due to repay their loans to HMRC to identify them as taxpayers with current employment.

Employers should start making Student Loan deductions only when:

  • they receive a Start Notice (From SLC)
  • a new employee gives them a form P45 with a 'Y' in the 'Continue Student Loan Deduction' box (box 5)
  • a new employee gives them a form P46 with a tick in box D (Student Loans).

Repayments deducted by the employer are worked out on individual pay periods and not on the total income for a whole year.

The deductions are paid over together with PAYE tax and NICs deducted during the same period. When employees leave, the employer must identify on their P45 that they are liable to make Student Loan repayments.

After the end of each tax year, employers must notify HMRC of the student loan deductions they have collected. HMRC then collates this information and passes it to SLC, who update their borrowers' loan accounts, including calculation of interest charges to match when the payments were made.

Borrowers who are not employees, but who fall under the Self-Assessment system, have to send HMRC a tax return each year. Their student loan repayments will be collected through SA, along with their tax.

Employees who also receive a SA tax return may have to make some loan repayments when they make their annual balancing payment, as well as having deductions made under PAYE. Borrowers can also make voluntary repayments direct to SLC at any time.


March Market Commentary

Tuesday 13 March 2012

On Monday February 27th the German Bundestag approved the Greek bailout by 496 votes to 90. A few days earlier consent had finally been wrung from the Greek politicians, and the ¬130bn bailout now looks to be in place. Is the Greek debt crisis - the constant theme running through this monthly review - over at last? You would be unwise to bet on it. The move is unpopular with the German electorate (who recognise that they are largely going to pay for it): unpopular in Greece (where the far left are making significant gains in opinion polls) - and still looked on sceptically by many market commentators. Expect to see the words 'Greece' and 'crisis' in future reviews.

Perhaps anticipating the eventual settlement - for now - of the problems in Europe, it was a generally positive month for world stock markets, with all the major markets again moving forward, although they generally failed to match the significant gains made in January.

There was the usual mixture of good and bad news - stronger than expected jobs growth in the US; a fourth consecutive month of declining exports in China - but that is in welcome contrast to say, six months ago when the news was almost unremittingly bad.


The UK stock market moved ahead during February, finishing the month at 5,872 for a rise of just over 3%. However, the month was not without its low points, as the arguments about reform of the NHS rumbled on. Disturbingly, the Coalition partners appear to hold directly opposing views.

There was bad news for the UK High Street, with the majority of news outlets reporting on the number of empty shops in the UK. The Guardian reported that the traditional British High Street was in a death spiral.

Worrying news as well for the UK service sector, which accounts for two-thirds of economic activity. The CBI reported a slowdown for the three months ending in January. Consumer services, covering hotels, bars and restaurants were particularly badly hit, in a period which included Christmas and New Year. Unemployment also continued to edge upwards, reaching 2.67m. The unemployment rate is now 8.4%, the highest for 16 years.

Just to be on the safe side the Bank of England pumped another £50bn into the economy. With Barclays being ordered to pay £500m in tax they had previously tried to avoid, at least theres only £49.5bn for the rest of us to find...


In the same way that the Greek debt crisis is a recurring theme of these monthly reviews, so are our old friends credit warning and downgrade. The ratings agencies seemingly take it in turns to issue the bad news. In February it was Moody's who stepped up to the plate, warning of a negative outlook for Austria, France and the UK. Italy, Portugal, Spain and a handful of smaller countries had their credit ratings cut.

In France, President Sarkozy launched his bid for re-election: not, as you might expect, with a statesmanlike speech on the debt crisis, but with his first tweet. Rather more seriously, the G20 said that Europe needed yet more money in its bailout pot. You get the feeling that the day on which the German taxpayer says 'no more' cannot be far away.

In keeping with the general mood, however, all the European exchanges (with the exception of Spain) rose during February. The German DAX index turned in an almost identical performance to the FTSE, rising by a little over 3% to finish the month at 6,856. France and Italy both rose, and even the Greek stock market managed a gain of 0.54% on the month.

Unfortunately this relatively good news wasn't enough to prevent Standard & Poor's stepping in at the end of the month and downgrading Greek debt yet again, effectively giving it junk bond status.


Having looked nailed on to be the Republican nominee last month Mitt Romney has faltered recently and now 'Super Tuesday' on March 6th has become pivotal in the race to oppose Obama. The GOP will no doubt be hoping 'Super Tuesday' on March 6th clarifies the situation: if not, expect to hear more talk of Jeb Bush emerging as a 'unity candidate.'

The economic news continued to be largely positive with the US creating 243,000 new jobs in January. This was well ahead of the estimated 150,000, with 50,000 of the new jobs being in factories. Unemployment fell to 8.3%, all of which is good news for President Obama. Interestingly, Ronald Reagan won his landslide second victory with unemployment at 7.5%.

On February 21st the Dow Jones index broke through the 13,000 barrier for the first time since the banking crisis. It ended the month at 12,952, a gain of 2.53% since the end of January.

Far East

The month started badly in Japan with Sony announcing annual losses of £1.8bn. Incoming chief Kazuo Hirai made an early bid for the understatement of the month award by saying the company felt a slight sense of crisis.

Japan's retail sales rose more than had been expected in January, boosted by a surge in car sales as government subsidies on energy efficient vehicles lifted demand. Overall, though, the Japanese economy shrank by 2.3% in the final three months of 2011, much worse than the 1.4% that had been anticipated: exports were not helped by the continuing strength of the yen and the floods in Thailand.

In China, the manufacturing sector contracted in February for the fourth straight month: exports orders dipped sharply thanks to the continuing problems in Europe. Neither was there much sign of China helping Europe through the debt crisis. Despite meeting Angela Merkel, Chinese Premier Wen Jiabao was disinclined to act. There is the strong suggestion that rather than simply pump money into the banking system, the Chinese would prefer to buy physical assets in Europe.

The Far Eastern stock markets comfortably outperformed Europe and the US during February - China was up 6.77%, Hong Kong 7.54% and Japan produced a stellar performance, rising by 10.58% in the month.

Emerging Markets

In general the emerging economies couldn't match the rises in the Far East, but Brazil, India and Russia all managed gains of around 5%. There were impressive performances from some of the smaller European countries: Finland was up by just under 8% and Denmark managed a double-digit rise. It will be interesting to watch the performance of this sector in the months ahead.

But the star performance of the month was turned in by our old friend Venezuela: shrugging off any worries about President Chavez's surgery in Cuba, the stock market rose by 16.5% in February.

And finally...

Musing on the continuing debt crisis, one commentator said that Greece needs re-booting. We've all fixed our computer by turning it off and turning it on again. But doing that with a country might be rather more risky...


Changes to Contracting out from 6 April 2012

Tuesday 13 March 2012

What is changing?

At the moment, the state pension arrangements consist of

  • the basic State pension; and
  • an earnings related pension currently known as the State Second Pension (formerly known as the State Earnings Related Pension Scheme or SERPS).

Until now, you have been able to contract-out of the earnings related element of the state pension scheme. This meant that if you chose to do so, a part of your National Insurance (NI) contributions - known as the NI rebate - was paid into your pension plan. Instead of building up pension in the earnings related element of the state scheme, these NI rebates built up additional benefits in your own plan. These additional benefits are known as Protected Rights.

As a result of changes announced by the Government, defined contribution pension schemes (also known as money purchase pension schemes) will stop being contracted out from 6 April 2012. This means that from 6 April 2012, if you are currently contracted out under such a pension scheme, you will no longer be contracted-out under that scheme and may instead build up entitlement to an additional state pension from that date.

As a result of these changes, Protected Rights will become ordinary rights from 6 April 2012.

How will my benefits change?

The following document summarises the current restrictions in place on your protected rights at various events, and how these will change from 6 April 2012.

Click here to download...

What if I am approaching retirement?

If you are considering taking your pension benefits soon we would recommend that you discuss these with us so that we can look at the right options for you

Are my funds working hard enough?

You may well have accumulated some pension funds by been contracted out in the past and this could be the ideal time to make sure that these funds are invested in an appropriate portfolio and with the right administrator. If you would like to discuss this then we would be happy to help.


Work longer, live longer!

Tuesday 13 March 2012

New statistics published in February 2012 by the Office for National Statistics (ONS), reveal that people are working longer than they used to. The average age at which people leave the labour market - a proxy for average age of retirement - rose from 63.8 years to 64.6 years for men and from 61.2 years to 62.3 years for women, between 2004 and 2010.

This average summarises information about the ages at which people stop working - for men, the peak ages for leaving the labour market are 64 to 66 years. For women, the peak ages are 59 to 62 years. Thus, retirement peaks around State Pension Age (SPA) for both sexes. However, many people choose to retire before SPA, and others to work beyond it.

There are inequalities in life expectancy between social classes. The latest estimates for England and Wales show a gap of over three years in life expectancy at age 65 between the highest and lowest classes in the National Statistics Socio-economic Classification (NS-SEC). Within the UK, life expectancy at age 65 is highest in England and lowest in Scotland.

A related question is whether people will be able to enjoy their retirement in good health. In 2008, the latest year for which figures are available, UK men at age 65 had 9.9 years of healthy life expectancy within a total 17.6 year life expectancy, while UK women at age 65 had 11.5 years of healthy life expectancy within a 20.2 year total life expectancy. These figures are for the average person and do not take account of differences in socio-economic class or location.

It seems obvious that extended healthy life expectancy offers us the attraction of later life activity and enjoyment. However, this carries with it the need for us to commit to making the active pursuit of health and well-being part of that life. The way to use ONS statistics is to recognise that in giving us average figures, they set benchmarks for us, for example of healthy life expectancy. Our own attitude of mind and lifestyle should become one of determination to exceed the average, whilst of course, enjoying the process! Good news also is that other ONS statistics forecast the increasing numbers of us who will become happily working octogenarians and active centenarians!

If you want to find out more or need advice about managing a good financial life in retirement, contact your usual adviser who will be happy to help.


The most important insurance you can have?

Tuesday 13 March 2012

The impulse to protect our loved ones is one of the most basic instincts a person can have. Yet the fact remains that many people don't take out sufficient insurance to protect themselves and their family should something happen to prevent them from being able to work. And if the main breadwinner in a household suddenly becomes unable to earn a wage, it can very quickly lead to serious financial hardship.

So how do you protect yourself against the financial risks associated with disability, accident or death? Life Insurance is the most common form of protection, but most policies don't provide cover for accidents or sickness. You can purchase Accident, Sickness and Unemployment cover, but this tends to provide just short term protection, typically for a period of 12 months, and that's unlikely to meet your needs should you suffer a life-changing event like a serious accident.

So what are the options? Income protection insurance is, in many respects, the most basic insurance of all, and can provide for your bills and day-to-day living expenses in the longer-term should the unexpected happen, whether that's an accident, critical illness or other traumatic event.

Choosing the right kind of protection is critical, but it's also it's also important to get the right level of cover, because people's requirements change as they get married, have children, move jobs or have their terms of employment changed.

So whilst you may have had sufficient protection last year, if your personal circumstances have altered, you may need to review your cover to ensure you have optimal protection. And like most kinds of insurance, if you want to make sure you get the protection that's right for you, it pays to get the advice of an expert.


February market commentary

Tuesday 21 February 2012

January got off to a predictably slow start, at least in Europe and it was January 9th before Angela Merkel and Nicolas Sarkozy met for talks. Unsurprisingly, they were worried about the credit crunch and - no surprise here either - Greek debt.

Other countries greeted 2012 less sluggishly and China and India reported a strong start to the year, with an increase in domestic demand helping to compensate for reduced orders from Europe.

Virtually all world stock markets turned in a positive performance in the first month of the year. The only fallers were Malaysia, Slovenia, Portugal and Spain, with several markets seeing rises approaching (or even slightly exceeding) 10%. Among the more established markets Hong Kong led the way, rising by 10.61%.


InvesmentThe news from the UK was almost unremittingly bad throughout January - and yet the FTSE 100 index managed a healthy rise of just under 4% to finish the month at 5,681.

Unemployment in the UK reached a 17-year high at 2.68 million, with youth unemployment continuing to be above one million. On January 24th the Guardian reported that the national debt had reached £1tn and in a more prosaic demonstration of the national malaise, Little Chef reported a round of job cutting, perhaps reflecting the fact that there are far fewer reps and delivery drivers on Britain's roads.

Most worrying though was the reported slump in Tesco's sales over the Christmas period. The company's shares slumped 15% on the news as Tesco warned of 'minimal growth' - a sentiment echoed by other retail chains such as Argos, Mothercare and Halfords.

Then on the very last day of January came news that Britain's manufacturers had enjoyed a strong start to the year, with output growing at the fastest rate for a year. The closely-watched Purchasing Managers Index survey for January was upbeat, and even had some economists suggesting that a 'double-dip' recession could be avoided. Another strong performance in February would be a very positive indicator for the UK.


As noted in the introduction, M. Sarkozy and Frau Merkel didn't meet until well into the new year, but then it was business as usual with yet more talks aimed at solving the Greek debt crisis and the EU bailout fund being boosted further to $1tn. Several learned commentators are now actively discussing the means by which Greece could leave the euro but - for the moment - the talks go on.

More worrying in the short term was the fact that the ratings agencies continue to downgrade both European countries and European banks. France lost its AAA rating in the middle of the month, and by the end of the month Italy and Spain had also been downgraded. Among the smaller economies, Belgium, Slovenia and Cyprus were all told to sit on the naughty step.

Speaking at the Davos Economic Forum, legendary financier George Soros warned of a lost decade for Europe, similar to that which affected South America in the 1980s.

Like the UK, however, European stock markets shrugged off all the worries to post strong gains in January: Germany's DAX index rising by 8.91% to finish the month at 6,617.

United States

It was easy to be confused in the US, in a month which saw headlines about SOPA and SOTU. The first was the Stop Online Privacy Act, eventually withdrawn in Congress after much protest from Google, Facebook and countless other online luminaries. SOTU was the annual State of the Union address, and it was widely seen as the start of Barack Obama's campaign for re-election. It may be that in the run up to the election the President finds himself repeating Bill Clinton's mantra - It's the economy, stupid - as the economic indicators coming from the US seem to be giving increasingly good news.

Despite this, the Dow Jones index posted only a modest rise compared to some world markets - up 3.6% to 12,632. However, American investors do have several reasons to be cheerful, with the economy expanding by 2.8% in the fourth quarter of 2011. Figures for December showed that inflation and unemployment both fell in the month and the US Federal reserve stated that there would be no interest rate rises before 2014.

The Far East

All the major markets in the Far East - China, Japan and Hong Kong - saw gains in January, and as noted above, Hong Kong's Hang Seng index rose by more than 10%.

Japan did post its first annual trade deficit for more than 30 years, but given the disruption caused by the tsunami of March 2011, that was hardly surprising.

China's economy only expanded by 8.9% in the last quarter of 2011: export growth was lower as a result of the problems in Europe, but as noted elsewhere, there are signs that domestic and regional demand is beginning to compensate for this.

Emerging Economies

January was a tremendous month for those stock markets usually filed under 'emerging markets' with Brazil, Argentina and India all posting double-digit rises. The Russian stock market rose by just over 7% as the anti-Putin protests subsided (perhaps because of the Moscow temperature in January&), but there was a less impressive performance from 2011's stellar performer, Venezuela, where the rise was only 4%.

Whilst the IMF cut its overall growth forecasts for 2012 - trimming its forecast of world economic growth from 4.1% to 3.3% - it inevitably sees the major contractions in Europe and the developed world. Emerging and developing economies in Asia, Latin America and Eastern Europe are still predicted to see growth of 5% or above.

And finally...

January was a quite outstanding month for the financial headline writers. Blacks Leisure found itself in trouble and was eventually bought by JD Sports for £20m. Last minute price reductions failed to save Blacks but did prompt the headline, Now is the winter of our discount tents. And Sir Fred Goodwin found himself back to plain old 'Mister' as his knighthood was removed for the RBS debacle. However, Mr Goodwin was to hang on to his massive and much-envied pension pot - prompting the English edition of the 'Volga News' to report, Queen takes Knight but no cheque, mate.


Undersaving Britain

Tuesday 21 February 2012

Pension saving is at its lowest level for 10 years according to recently published Department of Work and Pensions (DWP) analysis by the Family Resources Survey (FRS), a key source for pension information. The analysis came from interviews with around 25,000 private households across the UK in 2009 and 2010.

Only 38% of working-age people, 11.6 million out of 30.4 million people are saving into a private pension. In reporting the analysis, the DWP highlighted that this shows exactly why automatic enrolment into pension schemes being introduced from October 2012, is so critical.

The figures show a steady decline in pension saving between 1999/2000 and 2009/10, with the decrease being most dramatic among men and the under 40s. While the overall number of people saving into a private pension fell from 46% in 1999/00 to 38% in 2009/10, pension saving among men fell from 52% to 39%. And among people aged between 20 and 39 years old pension provision fell from 43% to 31%.

The analysis also reveals a map of pension provision across the UK in 2009/10, with higher pension provision in the South East (43%), Scotland (42%), the South West (41%) and the East (41%), and lowest pension participation in Northern Ireland (33%), London (34%) and the West Midlands (34%).

Minister for Pensions, Steve Webb, said: These are alarming figures and they underscore exactly why our pension reforms will be so vital. With fewer people saving into a pension, lower annuity rates and an average of 23 years in retirement, many people could face a poorer future in their later lives.

We simply must put a stop to this trend and get people saving. Automatic enrolment, beginning for the largest employers later this year, will get millions of people saving, many for the first time.

Automatic enrolment in a nutshell:

  • Beginning in autumn 2012, many more people will have access to a pension at work, to help them save for their later year
  • Employers will have to enrol all eligible employees into a pension and make minimum contributions into the scheme
  • If you are eligible, your employer will enrol you automatically into a pension
  • You will be able to opt out if you want to but will therefore miss out on an employer contribution of around £600 a year once minimum contributions are established - 3% of average earnings of £26,200 for full-time workers (ONS 2011 Annual Survey of Hours and Earnings).

If you want to find out more or need advice about pensions and savings, contact one of the team who will be happy to help.


The Retail Distribution Review or 'RDR' explained

Tuesday 21 February 2012

What is RDR and what does it mean for my adviser and for me?

The financial services sector is currently preparing for the Retail Distribution Review (RDR) - one of the biggest overhauls of financial regulation since the Financial Services Act was introduced in 1986. It was instigated with a view to improving service levels and transparency and ensuring the interests of financial advisers and their clients are in line.

For the Financial Services Authority, the industry regulator, RDR is about establishing a resilient, effective and attractive retail investment market that consumers can have confidence in and trust at a time when they need more help and advice than ever with their retirement and investment planning.

Specifically, RDR sets out to ensure that, as the client of a financial adviser, you:

  • are offered a transparent and fair charging system for the advice you receive;
  • are clear about the service you receive; and
  • receive advice from highly respected professionals.

As things stand, all the changes required for RDR compliance will come into effect on 31 December 2012 and will apply to every adviser across the retail investment market, including independent financial advisers, wealth managers and stockbrokers as well as banks and other providers of financial products.

What follows is designed to take you through some of the ways in which the proposed changes may affect the service you receive from your financial adviser - and why those changes may improve the advice you receive.

Adviser charging and the end of commission

The most visible change for many clients of independent financial advisers will be the introduction of fees for financial advice. Historically, advisers have relied on commission from product providers to pay at least some of the costs you incur when you consult them for advice. Regulators have taken the view this could give rise to a conflict of interest as some product providers offer higher commission payments than others for the same solution.

It certainly has the potential to create some anomalies. For example, it was difficult for advisers to recommend non-commission products - such as exchange-traded funds (ETFs) - without going out of business. It also meant advisers normally needed to recommend a product to get paid, when in fact, no product might have been the right answer to a client's needs. Equally, it meant there was some unintentional cross-subsidy across clients.

All financial advisers will now have to outline and agree fees for their advice in advance. You will become responsible for meeting these fees and product providers will no longer be able to pay a commission in any form. For many clients this will be the first time they have had to pay a fee directly for advice.

The idea is that this will make the process more transparent as it should be easier for you to work out what your adviser is charging, what they are doing in return for that charge and then to compare their proposition with that of other advisers.

A new definition of independence

'Independent' has always been a description that could only be used by those advisers who researched the whole financial market. Under RDR, the definition of 'whole of market' has expanded and will now cover areas such as ETFs, private equity and other more esoteric asset classes. An independent adviser must demonstrate they have considered all of these products in the process of addressing your financial requirements.

Under the new rules, if an adviser cannot meet the definition for independence, they will be deemed to be 'restricted'. This means they will use a smaller range of investments in addressing your financial requirements. In practice, of course, this may be perfectly sufficient for many clients whose financial needs are not all that complicated.

Higher qualifications

All financial advisers in the UK - whether they are described as 'independent' or 'restricted' - will have to achieve a higher minimum standard of qualification before they are allowed to provide advice. This means an increase in the basic level of knowledge and will lead to a higher level of professionalism for the industry as a whole.

Many advisers are using the changing regulation as an opportunity to obtain qualifications beyond the minimum standard - for example to chartered or certified status. Adviser clients should be reassured by these new standards.

Greater information and transparency

In conjunction with other recent legislation, however, RDR has specific rules about how clients should be treated and what information they should receive on an ongoing basis. Approved individuals within each advisory business are also legally accountable for ensuring those rules are followed.

This provides you with the added reassurance your adviser's business is being closely monitored within a regulatory framework. In the unlikely event anything does go wrong, there is both a set process and a chain of personal accountability to ensure things are put right.

Better business model

Many advisers are moving to a financial planning rather than product recommending role. Prior to RDR, an adviser might recommend a portfolio of investments to populate, for example, a pension or an Isa. Now, rather than recommending specific funds, say, they are more likely to offer you a comprehensive financial plan and help you keep this on track as your life changes and develops. This will involve recommending a whole range of different products and solutions, depending on what your circumstances demand.

Also, as part of the changing charging structure for advisers, you are likely to be able to pick through a menu of different advice options. For example, if you have the confidence to run your own affairs but also like to chat through issues on an intermittent basis - much the same as you might do with your solicitor or accountant - you could perhaps just pay by the hour, ask the questions you need to and then walk away.

Improved technology

Alongside the developments in regulation and communication, developments in financial-planning technology have taken the industry by storm. In various areas, more secure, more flexible and more user-friendly systems mean the way in which your financial plans and products are checked and monitored has improved immensely.

Many now have the ability to access information on your products and investments at the touch of a button. For example, instant portfolio valuations let you know if your plans are on track - or if any element is underperforming - while detailed breakdowns of the assets you hold, even when fund managers are continually trading the underlying stocks, mean you and your adviser can spot and realign your investments with your risk profile before any deviation gets out of hand.


Year-end tax planning - top tips for 2012

Tuesday 21 February 2012

Year-end tax planning is as important as ever and to help you with your preparation we thought it would be useful to include a summary of some of the key areas to consider before 5 April 2012:


  • For the 2011/12 tax year individuals can contribute up to £50,000 into their pension.
  • Those who have not contributed the full £50,000 in any of the previous three years may be able to pay increased amounts prior to 5 April 2012.
  • Individuals with no earning can contribute up to £2,880 into pension funds, and the government will gross this annual up to £ 3,600. This can be effective for children and spouses.
  • The lifetime allowance is being reduced to £1.5 million from £1.8 million from 6 April 2012. Individuals should review if any actions needs to be taken before 5 April 2012

The Family Unit

  • Family businesses should consider paying all members who are involved in the business an income so they can use their personal allowances. Where a spouse is an employee, the optimum level for 2011/12 is approximately £7,000, which also avoids National Insurance but optimises income for State Pension purposes.
  • Where there is a partnership or the spouse is a shareholder in the family company, there is more scope to spread the tax burden between the couple.
  • At an income level where one spouse is already receiving income in excess of £150,000, there will be a tax saving by transferring outright (or perhaps into joint names) investments to the other spouse whose income is below that level.
  • More interesting are shares in family trading companies. Provided an individual holds at least 5% of the shares in such a company and is an employee, a married couple can potentially double up on Entrepreneur's Relief for capital gains tax purposes thus securing up to £20 million of gains being taxed at only 10% whilst also gaining income tax advantages.
  • Children also have their own personal allowances and, where there are family discretionary trusts, consideration should be given to distributions to mop up personal allowances and lower bands of tax.

Tax Shelters

  • This typically involves Enterprise Investment Schemes (EIS) or Venture Capital Trusts (VCT). Both are Government-sponsored arrangements designed to reward investors who risk capital in qualifying companies.
  • EISs provide income tax relief at the rate of 30% on equity investments up to £500,000 per tax year (£1 million from 6 April 2012) in eligible companies. The relief can also be carried back one year. To retain relief, the shares need to be held for three years and if this is the case, can be sold free of capital gains tax. It is also possible to shelter capital gains where an investment is made into EIS shares issued one year before and 3 years after any gain has arisen.
  • VCT's offer relief at 30% on investments in them up to £200,000 per tax year. Dividends are tax free as are any gains on the sale of the qualifying VCT shares.
  • With the top rate of 50% applying, the attraction of investing in an ISA (Individual Savings Account) is increased. An individual can invest £10,680 for the tax year 2011/12 securing tax free income and gains within the plan.
  • A 60% Tax Rate?

    Where an individual's income exceeds £100,000, personal allowances are gradually phased out with the result that once income reaches £114,950, no personal allowances are due. The timing of exercising share options or realising income gains on investments therefore needs careful consideration where income is around this level. Income within this band is effectively taxed at a rate of up to 60% and therefore consideration should also be given to paying increased pension contributions, Gift Aid donations or accelerating qualifying interest payments to avoid this penal tax rate. Where this is an ongoing problem investments can usually be made via investment bonds to defer the tax liability.

    Capital Gains Tax

    • All individuals have an annual gains exemption up to £10,600. In arriving at this figure, losses for the current year must be deducted from gains before the exemption is applied. Married couples should therefore consider transferring assets between them prior to sale in order to potentially double this exemption.
    • When selling shares to step up base cost or to generate gains that will be covered by losses or the annual exemption, the anti-avoidance rules to counter 'bed and breakfasting' (the repurchase of shares within 30 days) should be remembered - although there are ways to reacquire those shares outside these rules.
    • It is proposed from 6 April 2012 that foreign currency held in bank accounts will be an exempt asset for capital gains tax purposes. It may be worth considering crystalising losses before the 6 April or deferring gains until after.

    Inheritance Tax

    The now familiar £3,000 annual exemption for what gifts remains available to all individuals and can be carried forward one year if not utilised. There is also an unlimited small gifts exemption of £250 per beneficiary each year.

    In addition, the exemption for regular gifts out of income is one which should be usefully reviewed at the end of each tax year. Payments into life policies for the benefit of others can be a useful way of utilising this exemption. Where pure cash gifts are involved, evidence should be kept of the intention of the donor to maintain a regular pattern of gifts and also to confirm that the amounts so given are well within the individual's surplus income for the relevant year.


January market commentary

Thursday 26 January 2012

December saw the death of North Korea's 'dear leader' Kim Jong-il, with command of the country seemingly passing to his youngest son - the 'great successor' - Kim Jong-un. But with sundry generals peering over the younger Kim's shoulder tensions are likely to remain high, especially around the border with South Korea.

4,000 miles away in Moscow, hundreds of thousands took to the streets to protest against the supposedly-corrupt elections won by Vladimir Putin's United Russia party. Putin dismissed the protests out of hand, but the uncertainty will continue until the presidential elections on March 4th - and possibly beyond.

In all of this it was easy to forget the ongoing turmoil with the euro; but unfortunately, life went on as normal in the conference rooms and banqueting halls of Brussels. The pivotal moment came on December 9th when David Cameron used the UK's veto to protect the City of London. Initial support from Hungary and the Czech Republic soon melted away and Britain found itself in a club of one. As the famous - perhaps apocryphal - newspaper headline had it, "Fog in channel: Europe isolated."

Bickering inevitably followed. The UK and France had a brief war of words, and the Deputy Prime Minister (supported by most of the Liberal Democrats) didn't appear to be entirely happy with Mr Cameron's actions. Dear leader possibly wasn't the phrase on Nick Clegg's lips...


For most of the month it was easy to be gloomy about prospects for the UK. Business in general didn't react well to David Cameron's use of the veto: Sir Martin Sorrell, boss of multinational WPP summed up the mood when he said, Intuitively, it can't be helpful. I'd rather be inside the tent.

Unemployment was the highest for 17 years: the public sector lost 65,000 jobs - thirteen times as many as the private sector gained. Youth unemployment showed no sign of falling; the retail trade in Scotland was hit by the bad weather and West End shops reported disappointing takings on their first traffic free weekend as consumer confidence reached an all-time low.

Boxing Day, however, proved a revelation, with record numbers flocking to the high streets and credit analysts Experian reporting a 21.5% year-on-year increase in the number of shoppers. This echoed the picture in the US over Thanksgiving weekend, with shoppers being attracted by unprecedented levels of discounting. Whether it will be enough to save some of the weaker retailers remains to be seen.

The UK stock market finished the year down 5.5% at 5,572: not the performance that investors were looking for at the start of the year, but significantly better than many major markets. In another sign that the UK is performing less badly than some of its major competitors, growth in the third quarter of 2011 was 0.6% compared to 0.2% in Europe.

UK interest rates are forecast to remain at 0.5% throughout 2012, which is at least good news for homeowners. The pound is expected to do relatively well in 2012 - although one commentator did describe it as the best looking horse in the glue factory.


At the end of the month the euro hit an 11 month low against the dollar, and a ten year low against the yen. There are worrying signs that the European banks are starting to hoard cash: if the trend continues that means liquidity could once again become an issue if banks refuse to lend to each other.

The major European stock markets were largely unchanged during December. Italy and Germany fell slightly, while France moved ahead - but the figures were not significant compared to the 12 month falls detailed below.

Worryingly, the new Spanish government of Mariano Rajoy revealed that the budget deficit will be 8% of GDP, not 6% as forecast. A new round of austerity measures will be introduced, including a pay freeze for public sector workers and increased taxes on top earners.

The economic forecasters IHS Global Insight revealed their predictions for Europe in the coming year, expecting GDP to fall by 0.7% overall. The ECB is expected to respond to this with further cuts in interest rates. This was echoed by a BBC survey of 27 of the UK's leading economists. 25 of them forecast a recession for Europe in 2012 and the majority put the possibility of a eurozone break-up at 30-40%.

Finally, the UK may agonize about youth unemployment exceeding one million but spare a thought for Spain: 48% of 16-24 year olds there are without a job - a truly depressing statistic to welcome the New Year.


The US was one of the few countries in the world where the stock market rose during the year, the Dow Jones index finishing 2011 at 12,170 to post a rise of just over 5%.

The year ended with three pieces of good news for the US economy: growth in the third quarter of 2011 was 1.8% and inflation fell in November to 3.4%. Perhaps even more encouragingly, the US trade deficit fell in both September and October: although total US debt now stands at $14 trillion (with China the biggest single holder of debt) there are some indications that the US consumer is starting to buy more home-produced goods.

2012 will see President Obama going up for re-election and you would assume the improved economic news will favour him. At the moment Obama's most likely challenger appears to be Mitt Romney, if he can hold off 76 year old Ron Paul and a revitalised Newt Gingrich. With the primaries starting this month the picture will rapidly become clearer.


Stock markets in China, Japan, Hong Kong and Russia all fell during the month; again, this was just a part of the wider falls seen around the world in 2011.

The Chinese trade gap narrowed in November, although largely as a result of the continuing crisis in Europe meaning that fewer goods were imported from China. Speaking in early December on the 10th anniversary of China's entry into the World Trade Organisation, President Hu Jintao promised to increase imports in a bid to boost world trade, saying that they may exceed $8 trillion over the next five years. Last year China bought $1.39tn from overseas so whether the promise carries much weight remains to be seen.

Japan's annual inflation rate fell to 0.5% in November: unemployment remained steady at 4.5% and interest rates were unchanged at - virtually zero.

As had been anticipated, China and Japan unveiled plans to promote the direct exchange of their currencies in a bid to cut costs for companies and encourage more trade. Bloomberg reported Ren Xianfang of IHS Global Insight as saying, this agreement is much more significant than any other pacts China has signed with other nations.

Previously, trade between the two countries had meant converting the currencies into dollars. Whilst the move might mean the dollar weakening in the region it is likely to be quietly welcomed by the US, as it could see the yuan - which the US has long held to be undervalued - moving closer to its true value.

World Stock markets - a look back at 2011

For the majority of the world's stock markets it is impossible to file 2011 anywhere other than in the 'bad years' column. Only seven of the 50 markets covered by Trading Economics managed a gain, and only one of these was in double figures. That market was Venezuela, up a hugely impressive 80% - although it would take a brave adviser to recommend investing in the country, and an even braver client to go along with it. To no-one's surprise the worst performing stock market of the year was Greece, losing more than 50% of its value in 2011.

Most markets saw falls of around 15-20%. Germany was down by just under 15% on the year: France by 17%. Japan fell by 17% and Hong Kong by 20%. Even the supposed growth economies of the BRIC countries saw their stock markets hit: in Brazil, Russia, India and China the markets fell by 18%, 20%, 15% and 22% respectively - all of which puts the performance of the UK market (down by 5.5% on the year) into a more favourable light.

For those wanting the numbers, the UK finished the year at 5,572; Germany's DAX index closed at 5,898 while in the Far East, Japan ended 2011 at 8,455; Hong Kong at 18,434 and China at 2,186. The rise in the US saw the Dow Jones index close at 12,170.

All stock markets fluctuated significantly during the year - for example, the FTSE touched 6,015 in February and saw a low of 4,791 in August. Other markets moved even more in percentage terms; Germany's DAX index reached 7,527 in May and hit a low of 5,072 in September.

These movements and all the attendant unpredictability made 2011 very difficult for both investors and their advisers - and what 2012 will bring is hard to say. Clearly the year is going to be dominated by the continuing efforts to sort out the euro and quite possibly by the problems of bank liquidity.

In many ways it would be tempting to end 2011 by thinking that 't can't get any worse and at least all the bad news is out in the open.'Whilst this might be a little naïve, there were signs of optimism around the world in the final quarter of the year; the strong performance of the US stock market; China's apparent increased willingness to trade and - hopefully - a new resolve to solve the problems of the euro. Inevitably, there will be difficult times in the coming year, but for investors, there are some lights at the end of the tunnel. We will - as ever - keep you up to date with all the relevant developments in the coming year, and will always be here to answer your questions.

A very happy and prosperous New Year from all of us.


New Year's Resolutions for your Financial Planning

Thursday 26 January 2012

Around 50% of us make New Year's Resolutions and 'sort the finances out' must be one of the most popular: but that's a little vague - it's more a wish than a firm commitment to take action. Looking at the January appointments we've had with new and existing clients, here are the topics that we've discussed most often. If you're determined to sort out your finances, these may give you some food for thought.

1. Sort out the mortgage

The mortgage is the biggest monthly expense for the vast majority of people, and making sure that the rate you're paying is competitive is basic common sense. Many people are paying a higher rate than they need to and half an hour with an IFA or independent mortgage broker can be time very well spent. Yes, there are costs involved in moving your mortgage, but these can often be outweighed by the savings to be made.

2. Sort out our life cover

This is an absolute priority, especially if you have children. Many people don't know the answer to questions like 'how much life cover do I need?' 'How much do I have?' 'Does it include critical illness cover?' No-one likes to think about the possibility of being seriously ill or dying, and therefore we tend to neglect our protection policies. Life cover can be surprisingly inexpensive: and even if you do have cover in place, make sure you have it checked on a regular basis. In many cases the cost of protection is continuing to fall and it may be possible to replace old policies and increase the amount of protection you have, without increasing your premiums.

3. Start saving for the children

However much you've just spent on Christmas presents, your children are going to cost you a lot more in the future. Whether it's university tuition fees, a first car, your daughter's wedding or the deposit on a house, the numbers are only going to go one way. Even if you only save a small amount, doing it on a regular basis over a long period can make a significant difference - and with the ability to save tax efficiently through an ISA, at least the taxman will be on your side.

4. Start saving for ourselves

What's true for the children is equally true for yourself; if there's a specific savings target you have in mind, or whether you simply need to save for the proverbial 'rainy day,' the earlier you start to save the easier it is to achieve your goal.

5. Sort out my pensions from previous employment

Many people have pensions left over from previous jobs, and despite various Government initiatives aimed at simplifying the system they still don't have an accurate idea of how much is in their pension 'pot.' Good pension planning is impossible without knowing the position you're starting from, so it's a sensible idea to talk to an IFA and find out the position with any old pension policies. For example, can they can be brought together and simplified?

6. It's time I understood the company pension scheme

Just as importantly, far too many people don't understand their existing company pension scheme. Is it final salary? Money purchase? Eightieths? Sixtieths? Can I make additional contributions? Buy extra years? Again, half an hour with a knowledgeable independent financial adviser will be time well spent. He'll be able to summarise the main benefits of the scheme for you, tell you the sort of pension you're likely to receive and advise you of the best course of action if you want to improve your pension benefits.

7. Investigate Inheritance Tax and Long Term Care

If it's the case that your parents are elderly, then it may be worth thinking about Long Term Care planning. Similarly if their - or your - estate is likely to be subject to Inheritance Tax, then action taken now could pay significant dividends in the future. Again, an IFA will be able to tell you what's possible, and the steps that could be taken now to prevent an unpleasant surprise in the future.

8. Look at Private Medical insurance

With tales of woe from the NHS continuing - and more economies seemingly still to be made - many people are starting to look at the option of private medical insurance. This may be an investment worth making, particularly if you run your own business and would need treatment at a time to suit you.

9. We need to sort out the partnership insurance

Many businesses are run as a partnership (whether it's a straightforward partnership or through equal shares in a limited company). The death or serious illness of one of the partners could have catastrophic consequences for the business - and serious implications for the other partner. And yet very few businesses have addressed the simple question of partnership assurance. We can explain the basic rules to you and give you an idea of what protection might cost: you may well be pleasantly surprised!

10. We need to make a will

Last - but by no means least - make sure that you have an up to date will. The consequences of dying 'intestate' (that is, without a will) can be severe, and with a simple will being relatively inexpensive its sensible to make sure that this area of your financial planning is kept up to date.

So there's plenty to think about... If you would like to discuss any of the above points - or any other aspect of your financial planning - then as always, please don't hesitate to contact us.


Ten strategies for tax planning in 2012

Thursday 26 January 2012

As we have said in other articles many of us will have made a New Year's resolution to sort out our finances in 2012 - but an often overlooked part of putting your finances in order is making sure that your tax planning is effective. Are you claiming all the tax relief you're entitled to? Are your investments arranged in the most tax efficient way?

To give your financial planning a further head start, here are ten strategies for efficient tax planning in the year ahead.

1. First and foremost, be organised. Make sure that you submit your tax returns on time. The rules have changed and the full £100 penalty will now be due if your return is late, even if there is no tax outstanding. Make sure you submit your return by October 31st if it's non-electronic, or by 31st January following the end of the tax year. The deadline is only days away! In addition, make sure you keep good records. This may not seem very exciting, but HMRC are increasingly stressing the importance of accurate record keeping. Everything tax related - interest statements, dividend vouchers, payslips, P60's and so on - needs to be kept. Your accountants will be happy even if you simply hand them a folder with everything in it: that's far better than not having the relevant documentation.

2. Make full use of your personal allowances. The basic personal allowance for 2011/2012 is £7,475 and this can be used effectively if you and your spouse are both involved in running a business. Even if only one of you is involved, the other could be employed in order to use up his or her personal allowance.

3. There's also nothing to stop children being employed in the family business so as to take advantage of their personal allowance. Remember though that payment must be for actual work carried out, and at a reasonable commercial rate. Your children also have their own annual exemption for Capital Gains Tax, so it may make sense to move some assets into their names, especially if the value of the assets is likely to increase.

4. The contributions which an employer makes to a pension scheme are generally tax and NI free for most employees. If you want to boost your pension, it may be worth considering 'salary sacrifice' - giving up some of your salary to increase your pension contributions. You'll need to discuss this with your employer and you may need some specialist advice from an independent financial adviser, but it can be a very effective way of increasing the amount going into your pension.

5. If you are running a business, try and incur expenditure just before the end of your tax year rather than just after as this will speed up the tax relief. Examples of the type of expenditure you might consider bringing forward include repairs to buildings and plant, and advertising and marketing campaigns.

6. In most small companies the directors and the shareholders are one and the same, and so they can choose the most tax efficient way to pay themselves. Using dividends as opposed to salary can result in savings to NIC, but it does require some planning. Any good accountant or independent financial adviser will be able to explain all the options to you.

7. The current threshold for VAT registration is £73,000: it may be worth registering voluntarily if your turnover is below this, although registration obviously brings extra administrative responsibilities. When you first register for VAT you can reclaim input tax on goods purchased up to three years before registration, providing you still have them at the time of registration.

8. Remember that interest paid on bank and building society deposits will have tax deducted at 20%. If you do not pay tax then you can sign a form to have the interest paid without the deduction of tax. Alternatively, you can submit a repayment claim to HMRC.

9. When you're choosing between different investments, it is the overall investment strategy that is the main consideration, not the tax position. You should make investments based on whether they are right for you and your financial planning: an investment strategy based purely on saving tax may do more harm than good.

10. Finally, the best strategy of all - and the best advice - is to work with your professional advisers on a consistent, long-term basis. They will be able to give you all the appropriate advice to make sure that your financial affairs are arranged in a way that is both tax efficient and right for your long-term financial planning. A regular review meeting with your accountant and/or your independent financial adviser is always time well spent.

As ever, if there is any aspect of your tax planning - or your wider financial planning - that you would like to discuss with us then please don't hesitate to contact us.

Any information concerning the taxation treatment of a recommended investment or action is based on our understanding of current Inland Revenue law and practice. Taxation law may be subject to future change.



Findings reveal 'head-in-the-sand' attitude towards pensions

Thursday 26 January 2012

Despite the recent strikes against cuts in public sector pensions, Aviva reports that most British people have a head-in-the-sand attitude to pensions. Aviva said that few people start "actively thinking" about pensions until they are 48 years old, and take another four years before they do anything about it.

Behind the failure to start preparing for a pension income is lack of money, which was cited by 47% of people surveyed and existing family commitments (cited by 19%). As a result, more of today's over-55s will have to work for longer. The Aviva research found that 26% said they would keep working if they could find a job when they are 65, 18% would stay on at work if their employer offered part-time opportunities, while 13% would carry on full-time in the same job if asked.

However Aviva also acknowledged in the report that one of the chief barriers to planning for retirement is that most people remain confused by pensions information and the variety of pension arrangements and schemes.

An Aviva researcher, psychologist Dr David Lewis, looked into the reasons why people fail to save. He found that one of the main obstacles to financial planning is the 'My Eyes Glaze Over' or 'MYEGO' factor. He stated that people finding figures tricky to understand, or even to think about, put their pension plans on a mental back-burner until in the mood to deal with them. He added, 'sadly, they never feel in the mood, so nothing gets done.'

If you want to find out more or need advice about pensions and savings, contact one of the team who will be happy to help.



December Market Commentary

Friday 02 December 2011

When you realise that the ‘Italian 10’ trending on Twitter refers not to Antonio Cassano's goal against Northern Ireland but to the yield on the Italian 10 Year Bond, then you know the European debt crisis – and the consequent turmoil on the world stock markets – remains alive and well.

November was the month when Italy overtook Greece for the number of times it was in the same sentence as the word “crisis.” Silvio Berlusconi stood down as Prime Minister and – as had happened in Greece – the technocrats moved in to implement austerity measures which would hopefully balance the books and help to bring stability to the eurozone.

In the UK the Chancellor delivered his Autumn Statement against a backdrop of gloomy economic forecasts and a public sector strike.

Meanwhile, on the other side of the world President Obama was intent on setting up a Pacific free trade area, whilst at the same time telling China how to manage its currency.
For the majority of the month world stock markets performed poorly. Only four markets managed overall gains in November; Pakistan, Ireland, Mexico and Venezuela. As could have been expected, Greece was the biggest loser with the index there down 18% in the month. However, markets staged a spectacular rally on November 30th  (the Dow Jones, for example, had its biggest one day gain since 2009). This was in response to an injection of liquidity from the US and other central banks and meant that overall many markets finished the month little changed.


But with UK Government borrowing due to hit £127bn in 2011/2012 and an extra £112bn of borrowing now being needed over the next four years, savings clearly had to be made. The axe duly fell on the public sector, with a 1% cap on pay rises from Spring 2012 and an anticipated 710,000 public sector job losses by 2017. Don’t expect this to be the last time your children have a day off school…

Worryingly, the CBI survey of business confidence in November showed a sharp fall from the one carried out in August, with 70% of those surveyed less confident than they’d been three months previously. Two in every five businesses had either frozen recruitment or were laying off staff, with business leaders citing weak consumer demand, instability in financial markets and – inevitably – the eurozone crisis as reasons for the loss of confidence. Another cause for concern was the fact that youth unemployment in the UK hit the one million mark in November.

Having started the month at 5,544 after a healthy rise in October, the FTSE spent most of the month in retreat, only to bounce back on November 30th  to finish virtually unchanged at 5,505.


Spain joined Greece and Italy in a change of government, with the centre-right Popular Party of Mariano Rojay claiming a decisive victory.

European stock markets followed the general pattern – meandering downwards for virtually all of the month, only to rally on the final day. Germany’s DAX index was typical – it started the month at 6,141; dipped well below 6,000 at one point and then finished at 6,088, a fall of less than 1%.


Up to 40% of US retail sales take place in November and December, and 152 million Americans were expected in the shops over the Thanksgiving weekend. According to the National Retail Federation sales were up 16% on the previous year with shops raking in $52.4bn over the four day weekend.

If your glass is half-full then this clearly shows that US consumer confidence is once more on the rise. Those for whom the glass is half-empty will see a different headline; ‘Spending on imported consumer goods widens US trade gap.’ Only time will tell…

As above, President Obama outlined plans to set up a trans-Pacific free trade area at a regional summit in Hawaii. Significantly the 21 countries involved in these talks account for 44% of world trade. Not for the first time Obama urged China to let the yuan rise, suggesting that it is currently undervalued by 20-25% which clearly gives China a major trading advantage.


Japan reported a 1.5% rise in GDP for the three months to the end of September, suggesting that the economy is starting to recover from the earthquake and tsunami. While Japan is still vulnerable to the strength of the yen and global economic problems, it does seem that the worst of the damage inflicted by Mother Nature has been overcome.
It was business as usual in China with another hefty trade surplus, but India reported a slowdown in GDP growth, caused by higher borrowing costs and the eurozone crisis. To put things in perspective however, India’s GDP growth slowed to 6.9% for the three months ending in September. What wouldn’t George Osborne give for such a slowdown?

And finally…

Our next monthly review will be published in the first week of January, so this may be an appropriate time to wish you a Happy Christmas and a peaceful and prosperous New Year. And rest assured that whatever happens in the global markets in 2012, we’ll keep you in touch.

George Osborne's Autumn Statement

Wednesday 30 November 2011

Chancellor George Osborne delivered his Autumn Statement at lunchtime on Tuesday, November 29th against a backdrop of gloomy economic forecasts.

The previous day, the Organisation for Economic Co-operation and Development (OECD) had predicted that the UK would slip back into a modest recession early in 2012, with unemployment reaching 9%. The OECD blamed this on a weak demand for exports, the Government's austerity measures and the squeeze on consumer spending.

Reporting on Tuesday morning, the Office of Budgetary Responsibility (OBR) was slightly more optimistic, forecasting growth of 0.7% for 2012 and 2.1% in 2013. However their forecast of growth reaching 3% from 2015 was looked on sceptically by most commentators.

The Chancellor began his statement by emphasising that Britain would live within its means - but he still promised a significant investment in education and infrastructure projects, so that the country could pay its way in the future.

Government borrowing is currently predicted to hit £127bn in 2011/2012. However, the problems in Europe mean that total Government borrowing over the next four years is now forecast to be higher than originally anticipated with an extra £112bn being needed.

It was inevitable that figures like this would mean that savings (or 'cuts,' depending on your political standpoint) would have to be made, and the axe quickly fell on the public sector. The Statement contained a serious amount of pain for public sector workers: pay rises will be capped at 1% for two years (after the end of the current freeze in Spring 2012), and the OBR is now forecasting 710,000 public sector job losses by the first quarter of 2017. With many public sector workers due to strike today (November 30th ) presumably the Chancellor thought he might as well get all the bad news out of the way.

George Osborne also announced that the pension age will rise from 66 to 67 from 2026, which is eight years earlier than previously planned. This move will save a further £59bn. Short-term, the value of the state pension will increase by £5.30 per week from April 2012.

One of the key themes of the Autumn Statement was investment in infrastructure - as Deloitte's head of infrastructure, Nick Prior, commented on Twitter, economic growth only comes when shovels get in the ground.

In a new initiative, some of the money for the infrastructure investment will now come from UK pension funds, following a model which has worked well in Canada and Australia. Joanne Segard, Chief Executive of The National Association of Pension Funds (NAPF), described the investment as a real win-win. Currently UK pension funds hold over £1 trillion in assets, but only 2% of that is invested in infrastructure. However, the Government is going to need to offer the pension funds long-term investments with an income that exceeds inflation. So potentially good news if you're invested in a pension - possibly not so good if you suddenly find that you're on a brand new toll road.

There is also a distinct possibility that we'll see the sovereign wealth funds of other countries investing in UK infrastructure projects. Before the Chancellor's speech the FT had already carried a piece by the Chairman of the China Investment Corporation, expressing his desire to team up with fund managers or participate in public-private partnerships in the UK infrastructure sector.

As well as the above, other key points in the Autumn Statement were:

  • The Bank Levy will rise to 0.088% from January 1st
  • The Government is aiming to collect £2.5bn a year from the Levy
  • A credit easing programme is to be introduced to underwrite up to £40bn in low-interest loans to small and medium sized businesses. The business rate tax relief holiday will also be extended to 2013
  • The Government will consult on allowing small firms to make staff redundant without them being able to claim unfair dismissal
  • The rail fare increases will be less than originally planned
  • The 3p fuel duty increase planned for January will be cancelled - so some good news for the hard-pressed motorist
  • An extra £1.2bn will be spent on education, with free nursery places being extended
  • And British science is to receive an additional £200m of extra funding to support research. (But to put this in perspective, it's 0.2% of the value which was placed on Facebook the same day.)

Reaction to the Autumn Statement was predictably mixed. The Times said that Osborne was 'inflicting pain to fight off [a] debt storm,' while the Guardian concentrated on the job losses in the public sector. Many commentators criticised the Chancellor for 'tinkering' when bolder action was needed.

Reaction to the speech on the stock market could hardly be described as euphoric, but the FTSE did manage a small gain after the Chancellor's speech.

But as if to emphasise that Britain remains vulnerable to the world economy in general and the European debt crisis in particular, Italian bond yields reached new highs while Osborne was speaking and credit ratings agency Fitch downgraded its forecasts for the US economy. By Monday night Fitch was also warning that it is getting harder for Britain to maintain its AAA credit rating which helps the Government to borrow at lower rates of interest. May you live in interesting times, as the Chinese saying goes. Whatever the contents of his Autumn Statement, George Osborne and the British economy will certainly be doing that...


November Market Commentary

Wednesday 16 November 2011

After three months of fairly constant bad news in this bulletin, it would be tempting to report October as the month when world stock markets turned the corner. Every major market rose and if you were lucky - or wise - enough to be invested in Argentina, you'd have seen gains of over 22%.

Unfortunately, the October Market Review is necessarily written at the beginning of November, when markets are once again in turmoil on the suggestion that Greece will hold a referendum on whether or not to accept the latest bail-out package. Inevitably, it was this uncertainty over Europe, and Greece in particular, that dominated October.

Politically, October saw the death of Colonel Gaddafi and, perhaps more significantly, the death of Crown Prince Sultan, the successor to the Saudi throne - which could ultimately lead to political instability in that country.

As to what November will bring, the only certainties are dark nights and foggy mornings. Certainty is the one thing stock markets want above all others: unfortunately, it's the one thing they don't have at the moment.


Having closed September at 5,128, the FTSE finished October at 5,544 - a rise of just over 8%. GDP for the last quarter rose by 0.5% (exceeding City expectations), the trade gap narrowed and Nationwide reported a year-on-year increase in house prices for the first time in six months. So it would be tempting to file October under 'good news' and leave it at that. Unfortunately there were ominous comments from the Chartered Institute of Purchasing & Supply who reported a slump in the manufacturing sector. The Manufacturing PMI fell to a 28 month low and Chief Executive David Noble said, We live in worrying times. He reported that the mood amongst his members was sombre.

Presumably Bank of England Governor Mervyn King was also feeling sombre when he announced an additional £75bn in Quantative Easing, to help us through what he described as the worst crisis ever.

However, there was good news in Wales, where Airbus opened a £400m factory to build aircraft wings - but they did warn that the UK needed to invest in its 'intellectual infrastructure' otherwise it risked jobs going abroad, 'where the talent is.'


What can you say about Europe? One day the Euro was collapsing, the next day it had been rescued. One day Angela Merkel and Nicolas Sarkozy had fallen out, the next they'd come together to save the Continent. Now the possibility of the Greek referendum has thrown everything back into the melting pot.

Bubbling away in the background - and seemingly temporarily forgotten - are potential debt problems in the Italy and Portugal. Solving the Greek crisis does not mean solving the European crisis.

Despite all this, European stock markets rose in October: the DAX index started the month at 5,502 and finished it at 6,141 - a gain of over 11%. France and Italy also reported double-digit gains. This was despite Spanish and Italian debt being sharply downgraded by Moody's and Carrefour issuing its fifth profits warning of the year.


October saw Mitt Romney move ahead of his rivals as the likely challenger to Barack Obama next year - but among the technology and creative communities it will be remembered for the death of Steve Jobs.

The Dow Jones index gained solidly in October, finishing just over 1,000 points up at 11,955. The US economy grew by 2.5% in the third quarter, and the trade deficit held steady, so once again, it would be tempting to say the US had a good month.

When you look more closely at the trade figures however, they make alarming reading. Total US exports for the month were $177.8bn - total imports were $223.2bn to give a trade deficit of $45.4bn. To put it another way, those figures mean that the US is adding a trillion dollars of debt roughly every two years. Suddenly, stimulus packages and smaller-than-expected increases in inflation don't seem like such good news.


Around the world, China saw a slight slowdown, with its trade surplus down to $14.5bn and GDP growth falling to a mere 9.1%. Interestingly, the trade surplus for the month was almost identical to Russia's. Japan also recorded a surplus after some negative months following the tsunami and the Japanese government intervened in the markets to reduce the strength of the Yen, saying that it did not reflect the true state of the economy. They blamed Forex speculators for pushing the currency to unrealistic levels.

Virtually all stock markets around the world rose in October, although China was a notable exception, falling by 1.7%.

And finally...

October was the month in which the word 'haircut' officially took on a new meaning. Having previously been something you tried to squeeze in between meetings, 'taking a haircut' now means accepting less than the face value of an investment; as in 'Banks prepare to take 50% haircut on Greek debt.'

Meanwhile David Cameron joined the rest of us on LinkedIn. Is he adding the Greek Prime Minister as a friend? Somehow I doubt it...

As ever if you do have any queries then please do not hesitate to speak to us: Call us on 01924 821111


Arch Cru - the story so far

Wednesday 16 November 2011

Arch Cru is a sorry tale - and one that still has some way to run. The company was set up in 2006, supposedly to provide a range of low-risk, cautiously managed funds which would be sold through independent financial advisers. The funds were regulated by the FSA, and several leading financial brands leant their names to the funds.

Chief among these was Capita, which - as 'authorised corporate director to the funds' - was theoretically responsible for safeguarding the interests of investors.

Unfortunately, the money which came into Arch Cru was not invested cautiously. Quite the reverse - it went into illiquid and infrequently traded assets, among which were business start- ups, shipping fleets and forestry. When the financial crisis of 2008 broke, many investors in Arch Cru wanted - or needed - to cash in their funds. They were unable to do so because the Arch Cru funds didn't have enough cash to meet the demands and the underlying assets could not be traded.

Dealings in the funds were finally suspended in May 2009 - and subsequent investigations have now revealed that funds were mis-priced and assets were misappropriated (with one estimate putting that figure as high as £1m).

In total it is estimated that 20,000 investors have lost money - quite how much they have lost remains to be seen. At the date of suspension, the Arch Cru funds were valued at £363.3m - this has subsequently fallen to £148.9m. However a partial distribution of £54m has already been made to investors, and just how much more they receive depends on the amount that is finally realised when all the assets are sold.

The £54m has come from Capita and other financial institutions, but many investors feel that the figure should be higher, given that Capita were supposed to be looking after the interests of investors. Criticism has also been levelled at the FSA, with several commentators arguing that the FSA did not subject Arch Cru to enough scrutiny and that warning signs were evident well before action was eventually taken. It now appears likely that the full picture will not be known until December or January, and that investors will end up losing 30-40% of their original investment.

Whatever the eventual outcome, the Arch Cru debacle emphasises the fact that an investor should never have too big a proportion of their overall funds either in one investment or with one fund manager. A good independent adviser will always ensure this, and will conduct regular reviews of a client's portfolio to make sure that funds are widely distributed. Don't put all your eggs in one basket, may have been something your Grandma said, but it remains a fundamental principle of investment planning.

If you're at all worried about any of your investments, or you'd like to discuss the overall balance of your portfolio, then please don't hesitate to get in touch with us.

As ever if you do have any queries then please do not hesitate to speak to us: Call us on 01924 821111


Can I afford to retire?

Wednesday 16 November 2011

Retirement has often been described as "the longest holiday of your life." But attractive as that sounds, can you afford to pay for the holiday?

Research by one leading insurance company shows that 69% of people over the age of 50 are concerned about their income in retirement. And with the recent uncertainty surrounding the stock market, plus the planned changes to public sector pension schemes, that figure is likely to increase.

Many people underestimate how much income they will need when they retire. If you've been used to having two cars, going on foreign holidays and eating out then it is unlikely that you'll want to give those up simply because you've stopped work. In fact, many people find that their need for income actually increases when they retire. After all, if you're behind a desk all day, the only money you'll spend will probably be on a sandwich at lunchtime. Contrast this with how much you spend on a day off.

As worries about income in retirement increase many people are opting to keep working after their normal retirement date, with 1 in 10 of those over 65 now being classed as "not fully retired." This figure is likely to increase in the future, and there are undoubted attractions to "cutting back a bit' - especially if you enjoy your job. That's fine if your health stays good, but although people are now living longer, they are not necessarily living longer in good health.

Many people who have their own business argue that "my business is my pension." Again, that works well in theory - but it assumes that you can sell the business for the price you want at exactly the time you want. With technology changing ever more quickly and more and more businesses losing market share to the internet, relying on your business to fund your retirement can be a high risk strategy.

More than any other aspect of financial planning, your retirement demands careful consideration. From checking on your likely state pension to tracking down any previous pensions you might have to making sure you're contributing sufficient to your current pension - retirement planning needs to be done thoroughly and reviewed regularly.

If you are in any way worried about your provision for retirement or you'd like advice on any aspect of pension planning, then please feel free to contact us.

As ever if you do have any queries then please do not hesitate to speak to us: Call us on 01924 821111


Ten ways to cut IHT liability

Wednesday 16 November 2011

As a starting point, every individual is entitled to a nil rate band, under which no inheritance tax is payable. For the current tax year, the nil rate band is £325,000. Any inheritable assets over that threshold figure can attract a tax of 40%, payable to HM Revenue & Customs.

There are however a number of steps, using exemptions and allowances that you can take to minimise this tax liability. Most of these are about ensuring that the threshold is not ultimately crossed, your wishes are fulfilled and intended beneficiaries do not miss out.

  • A first step toward avoiding Inheritance Tax (IHT) could be by making a will, particularly if your partner or spouse is the intended main beneficiary. Put your affairs in order and don't ignore the inevitability of your death!
  • Consider making early gifts in the hope and expectation that you will live for seven years after any gift is made. Gifts made more than seven years before the donor dies are free of IHT. Search for ways of helping the younger generation to benefit, for example helping with school or university tuition fees.
  • For some gifts to be IHT free, you don't need to survive for seven years. Consider using smaller allowances such as the £3,000 per person annual allowance for gifts to anybody and the ability to give up to £5,000 to your children when they marry. This could be £5,000 from each parent to each adult child.
  • Discretionary trusts can be set up and enable assets up to the nil rate band of IHT of £325,000 per person, or £650,000 per married couple or civil partnership, to be sheltered from IHT, so long as the donor survives seven years. Unlike outright gifts, these trusts let donors retain control of the assets.
  • A habit of gifting may cut your IHT liability if you can show that such gifts are made out of income, are made on a regular basis and they do not reduce your own standard of living.
  • Consider becoming an agricultural landowner. In general, agricultural land which is let out can become IHT-free after seven years and could be IHT-free after two years if you farm it. Complex rules govern business property and agricultural land reliefs, so professional advice should always be taken.
  • If you have suffered injuries in the past during military service and this becomes a contributory factor to your death, then your estate may become IHT-free.
  • It is not possible to shelter your family home from IHT if you remain living in it, so another solution could be to spend some of the wealth in the asset before it can be taken into account for tax, for example via an equity release scheme.
  • Individual Savings Accounts (ISAs), whilst being popular ways of avoiding tax on income and gains from a wide variety of savings and investments, have no protection against IHT. Plans to minimise your IHT liability should include seeking to reduce any ISA component.
  • If you have substantial overseas assets, choosing a tax friendly location abroad where you wish to be buried may help you avoid IHT on those overseas assets. A somewhat drastic step to take, but where you intend to be buried can be deemed to be where you are domiciled and if domiciled overseas, only your assets based in the UK are subject to inheritance tax.

The information above has been prepared solely for the purpose of providing a basic introduction to IHT planning. When making an investment decision, you should always seek the advice of a professional financial adviser.

Tax treatment & law

All statements concerning the tax treatment of products and their benefits are based on our understanding of current tax law and Her Majesty's Revenue and Customs (HMRC) practice. Levels and bases of tax relief are subject to change.

As ever if you do have any queries then please do not hesitate to speak to us: Call us on 01924 821111


Everyone can now take advantage of the higher Isa allowances

Friday 21 October 2011

The announcement from The Treasury is good news for long term savers who may wish to maximise their longer term growth by including more capital in their ISAs. Up to £10680 per person can now be sheltered within Isas and the range of investment choices have never been greater. Many existing investors are receiving disappointing returns with their existing Isa provider and it is well worth considering all your options.We will be happy to discuss this issue and look forward to your call.


Allowances will increase to by £600 per year to £11,280 from 6th April 2012


Investments that give tax relief

Friday 20 May 2011

Even in these times of high taxes there are a number of investments that do qualify for personal tax reliefs.


Pension contributions- can still be made with tax allowances given against the highest rate that you pay.Even 50%!  

However,make sure that you take advice as high earners reliefs are complicated.

Venture Capital Schemes(VCTs) & Enterprise Initiative Schemes(EISs)- can qualify for income tax relief and with EIS arrangements you may be able to defer your capital gains.

Risk levels vary considerably so make sure that the scheme is suitable for you.

Property Renovation Schemes-  allow you to offset against the highest rate of tax that you pay,so can be attractive.

These schemes are appealing but make sure that you understand any risks.

So with a variety of schemes you can create a portfolio that is right for you !!


Great news for entrepreneurs

Sunday 10 April 2011

A huge rise in entrepreneurs relief now means that business owners can enjoy generous tax consessions when they sell their business.

The existing limit was raised by a considerable percentage to £10 million pounds.

Well done Chancellor !!


More flexibility for pensions

Wednesday 06 April 2011

As expected, the Government has announced that it will no longer be necessary for those with sufficient funds in their personal pension plans and other private pensions to purchase an annuity, that is, a guaranteed income for life. 

Whilst, on the surface this may seem a small change, possibly only affecting a few people, in practice this has significantly changed the whole nature of pension planning in the UK. 

We very much welcome these changes and over the months ahead, as we discuss their impact on individual client situations, we believe that their enormity in terms of our whole thinking about pensions will gradually become clear.

Please call us if you would like to discuss the potential implications for you and your family.

Valuation Centre

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Lofthouse Gate Ltd  - 
Prosperity House, 9 - 11 Potovens Lane, Wakefield, WF3 3JE
 |  Tel: 01924 821111  |  Fax: 01924 821112  |  email:

Lofthouse Gate is a trading name of Fairstone Financial Management Ltd. Registered in England No. 05574120   
- Authorised and regulated by the Financial Conduct Authority - Financial Services Register number: 475973   

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